MON&Y  AND 
INVESTMENTS 


MONTGOMERY  ROLLINS 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


MONEY  AND  INVESTMENTS 


Money  and  In 


A  REFERENCE  BOOK  FOR  THE  USE  OF  THOSE 
DESIRING  INFORMATION  IN  THE  HANDLING 
OF  MONEY  OR  THE  INVESTMENT  THEREOF 


By  MONTGOMERY  ROLLINS 

Other  boofa  by  the  same  author 

Government  Bond  Values  Tables  —  Interest  Payable  Quarterly 

Tables  of  Bond  Values  —  Interest  Payable  Semi- Annually 

Tables  of  Bond  Values  —  Interest  Payable  Annually 

Laws  Regulating  the  Investment  of  Bank  Funds 

Cipher  Code  —  Banker's  Edition 

Etc.,  Etc. 


BOSTON:   DANA  ESTES  &  COMPANY 
LONDON:       GAY     &      BIRD 


T 
1 1*7 


Copyright,  1907 
BY  MONTGOMERY  ROLLINS 


Entered  at  Stationers'1  Hall,  London 
All  rights  reserved 


^rr 


COLONIAL   PRESS 

Electrotyped  and  Printed  by  C.  H.  Simonds  6r*  Co. 
Boston,  U.  S.  A  . 


DEDICATED  TO  THOSE  OF  SMALL  FOR- 
TUNES AND  WHO  ARE  DEPENDENT  UPON 
THE  WISE  INVESTMENT  THEREOF. 


FOREWORD 


IN    EXPLANATION 

THERE  is  not  any  book  which  is  of  especial  value  in 
aiding  one  to  an  understanding  of  the  many  intricate  ex- 
pressions and  terms  of  the  financial  world.  Most  attempts 
in  this  line  have  either  been  by  some  "  insider  "  who  had  an 
"  axe  to  grind  "  and,  therefore,  desirous  of  selling  his  own 
wares,  or,  if  not  that,  then  some  book  or  pamphlet  which 
treats  of  investments  and  money  matters  from  the  standpoint 
of  supposing  the  reader  to  already  have  a  fair  knowledge  of 
finance,  which  has  resulted  in  the  use  of  terms  and  expressions 
not  comprehensible  to  many.  I  am  not  aware  of  the  existence 
of  any  reference  book  treating  of  matters  relating  to  money, 
and  the  handling  and  investment  thereof,  in  an  elementary 
way;  in  a  fashion  to  which  those  entirely  untrained  in  its 
management  may  turn  and  find  facts  needful  to  their  under- 
standing plainly  set  forth.  Such  simple  information  as  to  the 
correct  way  to  draw  a  check,  indorse  the  same,  open  a  bank 
account,  and  a  thousand  and  one  details  of  every-day  life, 
are  things  often  not  clear  to  many. 

It  has  long  been  my  belief  that  there  is  need  of  some  pub- 
lication in  which  a  mere  beginner  in  the  handling  of  money 
may  seek  for  assistance  in  unravelling  the  mysteries  of  the 
expressions  of  Wall  and  State  Streets,  and  giving  in  a  concise 
form  such  instruction  as  above  suggested.  I  wonder  if  the 
financial  writer  of  the  average  newspaper  realizes  what  a 
tremendous  amount  of  financial  slang1  he  uses,  and  how  he 

1  Examples  of  financial  slang  : 

"  The  market  is  in  a  much  overbought  condition;  things  have  been 
sky-rocketing  until  there  begins  to  be  an  evidence  of  pressure  upon  the 
long  side.  Fancy  stocks  have  advanced,  deals  have  been  in  evidence, 
off  which  Wall  Street  has  been  scalping  points.  Stock  pyramiding  is 
noticeable  everywhere;  in  fact,  they  have  been  jack-screwing  the  market." 
<  "  The  shorts  will  probably  now  begin  to  get  in  their  work,  for  the 
wise  ones  are  beginning  to  act  a  little  bearish.  The  old  lady  of  Thread- 
needle  Street  must  be  considered." 


vi  MONEY   AND   INVESTMENTS 

has  come  to  depend  upon  such  words  as  "  gunning,"  "  pyra- 
miding," "  scalping,"  etc.,  to  convey  his  meaning.  No  less 
a  newspaper  than  one  of  the  leading  New  York  dailies  recently 
published  a  long  detailed  statement  of  the  earnings  of  the 
"  Clover  Leaf  "  Road,  without  anywhere  giving  the  real  title 
of  the  company.  Do  the  banking  houses  which  issue  circulars 
offering  bonds  and  other  investments,  or  the  stock  exchange 
houses  which  publish  market  letters,  ever  think  what  a  hope- 
less mass  of  matter  this  all  is  to  the  uninitiated?  Necessarily 
all  this  information  has  to  be  put  in  a  condensed  form,  and 
must  be  issued  on  the  supposition  that  such  common  expres- 
sions as  "  selling  short,"  "  bull  market,"  "  legal  for  savings 
banks  of  New  York  State,"  "  net  debt,"  etc.,  are  understood 
by  the  readers,  and  it  may  be  said  that  the  last  ten  years  has 
been  an  era  of  education  to  the  investing  public,  and  that 
most  of  the  matter  sent  out  is  understood  by  the  large  ma- 
jority. The  monthly  circular  of  the  bond  selling  houses, 
especially,  have  been  mailed  so  broadcast  of  late  that  a  great 
deal  of  information  must  have  been  absorbed,  even  by  the 
most  obtuse.  But  there  is  still  much  to  be  desired.  Women, 
in  particular,  who  are  unexpectedly  called  upon  to  handle 
money,  are  generally  puzzled  to  understand  the  meaning  of 
the  words  and  phrases  in  common  use  by  all  financiers. 
Many  a  man  makes  the  mistake  of  telling  his  wife  little  or 
nothing  of  his  financial  affairs  during  his  lifetime,  or  in  any 
way  preparing  her  for  the  care  of  his  property,  be  it  ever  so 
little,  in  case  of  his  death.  A  woman  so  left  with  a  modest 
fortune  may  have  to  start  at  the  very  A  B  C  of  investing,  and 
needs  knowledge  sorely. 

It  will  be  my  aim  to  explain  in  language  as  little  technical 
as  possible  the  many  most  commonly  used  terms  and  ex- 
pressions in  relation  to  investment  matters.  In  order  to 
avoid,  to  a  great  extent,  the  use  of  one  financial  term  in  the 
explanation  of  another,  it  will  be  necessary  to  treat  each  sub- 
ject at  some,  I  fear  perhaps  too  great,  length.  To  the  financier 
I  am  aware  it  will  appear  unnecessarily  detailed  and  elemen- 
tary and  some  of  the  definitions  almost  ludicrously  simple,  but 
I  can  perceive  no  injury  likely  to  result  from  erring  in  that 
direction.  There  are  many  things  which  the  beginner  should 

"  Sugar  rose  from  the  bottom  of  the  cup  and  had  a  very  sweet  look." 

"  The  mills  where  tips  are  manufactured  were  accordingly  put  on  two 
shifts,  and  pools  went  to  work  with  zeal." 

"  Stocks  went  both  ways  to-day.  There  was  some  selling  short,  ap- 
parently, some  going  long,  some  supporting  of  the  cliqued  stocks. 
The  cliqued  stocks  were  strongest.  London  came  firm,  and  New  York 
started  the  same  way ;  then  came  reaction  and  recovery. 

"Great  laundry  establishments  are  now  running  night  and  day,  and 
unscrupulous  manipulators  of  good,  bad  and  indifferent  corporations 
are  working  overtime." 


FOREWORD  vii 

know:  the  ordinary  rules  to  safeguard  one's  investing  which 
the  experienced  man  applies  almost  unconsciously  in  making 
his  investments.  To  the  latter  it  hardly  occurs  that  there 
are  thousands  who  do  not  even  know  the  desirability  of  a 
sinking  fund,  or  that  it  is  generally  considered  better  to  have 
a  bond  payable  in  gold  than  in  lawful  money,  etc.  I  have 
known  a  banker  to  spend  more  than  an  hour  in  explaining 
the  meaning  of  "  accrued  interest  "  to  a  woman,  and  a  school 
teacher  at  that.  Such  instances  are  by  no  means  rare. 

A  book  which  will  help  to  educate  the  investors  will  be  not 
only,  I  hope,  of  value  to  them,  but  also  to  the  bankers,  who 
are  necessarily  busy  men,  by  having  made  it  possible  to  do 
business  with  a  greater  dispatch  with  such  as  may  have 
received  some  benefit  from  its  use. 

Many  investment  bankers  doubt  the  wisdom  of  doing  busi- 
ness at  all  with  the  average  woman  from  the  fact  that  so  much 
time  is  consumed  in  explanation  of  details,  and  often  from  the 
lack  of  knowledge  which  many  women  have  of  the  most  com- 
mon business  rules,  and  which,  either  from  courtesy  or 
charitableness,  the  banker  often  allows  her  to  break,  to  his 
own  pecuniary  loss.  There  must  be  necessarily  more  women 
who  can  find  need  for  the  book  than  men,  yet  it  is  hoped  that 
there  will  be  among  the  latter  many  who  will  find  here  and 
there  in  its  contents  something  previously  not  clear  to  them. 

The  necessity,  perhaps,  for  a  little  financial  knowledge  on 
the  part  of  women  is  not  so  urgent  as  formerly.  In  early 
days,  the  strenuous  domestic  cares  left  them  little  time,  if 
any,  to  the  care  or  thought  of  money,  and  it  is  not  to  be 
wondered  at  that  the  husband  made  no  attempt  to  educate  his 
wife  in  such  a  direction.  In  the  present  day  of  greater  wealth 
and  numerous  servants  to  lighten  the  domestic  burdens  of 
the  housekeeper,  it  has  become  quite  customary  for  the 
woman  of  the  house  to  have  a  bank  account,  and  check  against 
it  for  personal  and  household  expenses.  Consequently,  to  a 
limited  extent,  many  women  of  late  years  have  been  gathering 
experience,  but,  step  by  step,  with  this  slight  growth  of 
knowledge,  have  arisen  more  and  more  complicated  questions 
of  finance,  making  it,  year  by  year,  harder  to  grasp  even  a  fair 
knowledge  of  the  handling  of  money,  with  the  many  intricate 
stock  and  bond  issues  now  upon  the  market.  Although  this 
book  will  endeavour  to  cover,  in  a  brief  way,  such  simple 
subjects  as  the  making  of  a  draft,  drawing  a  check,  etc.,  yet 
it  is  intended  to  cover  financial  and  investment  matters  in 
general,  and  to  set  forth  in  a  clear  light  their  many  ramifica- 
tions. 

No  attempt  to  lay  down  fixed  rules  to  lead  the  investor  to 
certain  success  finds  its  way  into  these  pages;  rather,  it  is  the 
desire  to  make  clear  certain  dangers  which  the  investor  should 


viii  MONEY   AND   INVESTMENTS 

avoid,  and  establish  principles  which  should  prove  helpful  in 
reaching  a  fair  idea  as  to  the  value  of  securities. 

The  writer  has  made  an  earnest  effort  to  make  clear  some 
of  the  many  intricacies  which  surround  the  complicated 
nomenclature  of  bond  issues.  It  is  not  surprising  that  he 
received  a  letter,  not  long  ago,  from  a  young  man,  unknown 
to  him,  about  to  connect  himself  with  a  Southern  bond  house, 
asking  if  there  were  not  some  book  to  which  he  could  turn 
to  put  him  on  horseback  and  start  him  out  of  the  wilderness, 
as  it  were,  in  regard  to  the  complexity  of  names  attached  to 
issues  of  securities. 

The  writer  cannot  undertake  to  give  every  possible  com- 
bination of  names.  For  instance,  there  is  a  "general  mortgage 
bond,"  "  sinking  fund  bond,"  a  "  first  mortgage  bond,"  and 
so  on,  all  of  which  will  be  separately  described  in  the  text, 
but  to  undertake  to  give  a  fair  definition  for  such  possible 
combinations  as  "first,  general  mortgage,  sinking  fund 
bond,"  would  lead  to  an  increase  in  the  number  of  subjects 
too  great  to  contemplate. 

Again,  it  would  not  be  safe  to  elucidate  all  the  laws  and 
legal  technicalities  which  may  surround  an  issue.  It  is  sup- 
posed that  every  reputable  bond  house  shall  have  taken  the 
legality  of  the  issue  into  consideration  before  offering  it  for 
sale;  and  in  this  connection  the  reader  is  asked  to  turn  to 
the  subject  headed  "  Attorney's  Opinion."  Reference  to 
issues  in  general  can  only  be  made,  and  the  value  of  securities 
referred  to  from  the  same  standpoint,  for  there  must  be 
many  common  stocks  which,  in  the  nature  of  things,  frequently 
sell  higher  than  the  preferred  of  the  same  company;  or  the 
first  mortgage  bonds  of  one  company  may  not  sell  at  as  high 
a  price  as  the  third  mortgage  bonds  of  another.  All  these 
facts  must  be  taken  into  consideration,  and  the  province  of 
the  writer  is  only  to  undertake  a  reasonable  interpretation 
and  definition  of  each  security  issued  within  the  understand- 
ing of  the  least  experienced. 

It  is  not  the  intent  here  to  treat  of  mercantile  affairs,  but 
upon  financial  matters  and  investments  as  dealt  in  by  banks; 
money  and  the  handling  of  it,  etc.  The  meaning  of  words 
and  phrases  as  defined  herein  is  as  understood  in  the  world  of 
finance. 

It  is  not  advisable  to  follow  accurately  the  nouns,  verbs, 
or  adjectives,  as  the  same  are  given  in  a  dictionary  or  an 
encyclopedia,  but  select,  without  regard  to  their  grammatical 
position,  words  used  commonly  in  financial  matters.  In  some 
cases  definitions  will  diverge  widely  from  those  of  an  encyclo- 
pedia and  will  usually  not  give  all  the  possible  uses  of  a  word, 
but  only  such  meanings  as  relate  to  the  handling  of  money 
and  securities. 


FOREWORD  ix 

The  effort  has  been  made  to  arrange  all  subjects  alphabetic- 
ally under  the  headings  by  which  they  are  most  commonly 
known.  If  the  reader  is  unable  to  find  information  upon  the 
subject  sought,  let  him  endeavour  to  think  of  some  other 
term,  word,  or  arrangement  of  words,  which  might  refer  to 
the  same  subject,  with  the  hope  of  locating  it  in  some  other 
part  of  the  book. 

It  will  be  useless  to  attempt  to  cover  every  conceivable 
financial  term  used  in  this  country  and  Great  Britain,  or  in 
the  English-speaking  world  in  general,  nor  can  it  be  possible 
to  give  all  the  intricacies  of  the  law  and  the  rights  of  the 
lender,  debtor,  indorser,  etc.,  but  merely  to  cover  those  most 
usually  come  in  contact  with  in  daily  financial  transactions 
or  in  reading  newspapers.  And,  as  regards  the  rights  of  the 
lender,  etc.,  to  give  the  most  common  principles  to  guide  him. 
This  is  not  intended  for  an  advanced  book  on  finance,  for  there 
are  separate  books  which  cover  nearly  every  general  subject. 
It  is  more  for  daily  reference  and  a  guide  to  those  greatest  in 
need  of  information. 

There  will  naturally  occur  to  some,  now  and  then,  points 
not  covered.  To  such  I  would  say  that  the  Encyclopedia 
Britannica  leaves  much  to  be  desired,  and  that  the  aim  here 
is  to  produce  a  simple  "  handbook  "  of  most  commonly  used 
expressions  and  most  needed  rules  to  aid  the  beginner  in  the 
handling  of  money  and  investments.  To  enumerate  in  detail 
all  the  many  rules  that  the  banker  himself  has  to  exercise, 
first  and  last,  in  his  own  larger  experience  of  buying  and 
selling,  would  be  but  to  breed  confusion. 

The  names  chosen  by  different  corporations  for  new  security 
issues  are  sometimes  strange  and  conflicting,  and  very  often 
misleading;  again,  entirely  improper,  and  it  is  not  surprising 
that  a  young  man  entering  the  banking  business  seeks  relief 
from  the  confusion.  It  is  human  nature,  a  fact  well  ap- 
preciated in  the  financial  world,  that  there  is  a  good  deal  in  a 
name,  leading  to  the  giving  to  many  security  issues  titles  to 
facilitate  their  sale. 

The  names  of  different  classes  of  securities  are  so  misused, 
sometimes  purposely,  the  different  meanings  of  the  same  terms 
overlapping  one  another,  that  it  will  not  be  strange  if  some 
readers  of  this  book  take  exceptions  to  the  definitions  given 
herein  regarding  different  security  names. 

A  bond  is  not  technically  a  "  first  mortgage,"  "  second 
mortgage,"  etc.,  but  secured  by  a  "  first  mortgage,"  or 
"  second  mortgage,"  on  the  property,  but  throughout  this 
work  the  latter  meaning  will,  for  the  sake  of  brevity,  often 
be  taken  for  granted,  and  the  former  wording  used.  There 
are  so  many  securities  which  are  commonly  referred  to  in 
Wall  and  State  Street  parlance  by  what  may  almost  be  called 


x  MONEY  AND   INVESTMENTS 

nicknames,  or,  at  least,  a  great  abbreviation  of  the  full  title, 
that  the  most  commonly  used  ones  will  be  found  throughout 
the  book,  alphabetically  arranged.  To  endeavour  to  cover 
this  ground  fully  would  add  too  greatly  to  the  size  of  the  work. 
A  sample  of  the  above  would  be  that  of  the  Chicago,  Bur- 
lington &  Quincy  R.  R.  Co.,  which  is  known  by  all  of  the 
following:  "  Q,"'"  B.  Q.,"  "  C.  B.  Q.,"  "  Burlington,"  etc. 

The  statements  made  herein  are  compiled  from  reliable 
sources,  mainly  official,  and  are  the  latest  obtainable.  Al- 
though the  author  has  left  no  stone  unturned  to  verify  his 
information,  he  cannot  suppose  that  this  work  goes  forth 
without  errors,  but  it  is  hoped  that  those  which  exist  will 
prove  unimportant. 

To  certain  officials  in  various  departments  of  the  United 
States  Government;  to  many  well-known  bankers  and 
brokers,  experts  and  specialists  in  their  professions;  to  several 
painstaking,  resourceful  lawyers  of  known  reputation;  and 
to  many  others,  busy  and  successful  men  in  their  separate 
walks  in  life,  I  wish  to  express  my  deep  sense  of  obligation 
for  most  able  and  necessary  assistance  in  the  preparation  of 
this  work.  To  them  will  be  largely  due  whatever  successes 
may  befall  it,  and  to  the  author  its  shortcomings. 


II 

INVESTMENT    AND    SPECULATION 

Suggestions 

THE  tremendous  and  invincible  force  of  prosperity  which 
spread  throughout  our  States,  beginning  in  1897,  the  like 
of  which  no  other  nation  has  ever  experienced,  has  enabled 
many  corporations,  which  met  financial  disaster  during  the 
middle  of  the  "  nineties,"  to  regain  a  sound  moneyed  footing. 
Many  securities  of  such  corporations,  which  were  discredited 
in  the  minds  of  investors,  have  since  been  eagerly  sought  for 
by  the  most  conservative  and  at  very  high  prices.  People 
who,  losing  faith  in  the  future  of  this  great  food  producing 
country,  threw  over  their  investments  at  enormous  losses, 
must  look  back  with  wonder  upon  their  timidity,  and  feel 
that  until  the  United  States  has  exhausted  its  resources,  a 
condition  which  at  least  this  generation  need  give  no  concern, 
the  swing  of  the  pendulum  to  hard  times  and  low  prices 
furnishes  no  time  to  sell  standard  securities,  but  rather  a 
time  to  buy.  Yet  this  is  contrary  to  the  custom  of  the  small 
investor;  he  loses  confidence  and  sells  at  panicky  prices,  and 
regains  faith  just  in  time  to  buy  at  inflated  prices.  Now,  in 
all  such  times,  there  must  be  some  who  reap  the  benefit  of 
this  ill-advised  selling  and  buying;  they  are  the  large  in- 
vestors; bankers  and  brokers,  who  trade  for  their  own 
accounts;  and  those  associated  in  the  management  of  our 
corporations  and  who  can  judge  the  future  of  their  earning 
capacity.  How  is  it  so  many  rich  men  grow  richer?  Does 
it  ever  occur  to  the  small  investor  that  no  new  money  actually 
comes  into  existence  by  the  selling  of  a  thousand  shares 
of  stock  at  twenty  dollars  per  share  over  the  cost?  Yet 
such  a  transaction  enriches  some  one  $20,000.  Not  even 
the  equivalent  of  money,  such  as  the  farmer,  the  mechanic, 
the  miner,  etc.,  produces,  results  from  such  a  buying  and 
selling.  Some  one  must  at  some  time  have  produced  the 
money  equivalent  which  pays  the  $20,000  profit.  It  is 
the  toiler  who  really,  by  his  labour,  creates  the  money  equiva- 
lent to  buy  the  stock.  Recognizing,  therefore,  how  many 

xi 


xii  MONEY   AND   INVESTMENTS 

rich  men  grow  richer,  and  how  few  small  investors  profit  in 
the  long  run  by  buying  and  selling  securities  for  gain,  it  must 
be  evident  that  there  is  a  constant  flow  of  the  earnings  of 
the  toiler  into  the  pockets  of  the  few,  largely  because,  as  illus- 
trated by  the  old  simile  "  like  a  flock  of  sheep,"  the  "  public  " 
sells  at  low  prices  and  buys  at  high,  and  the  wise  ones,  hav- 
ing confidence  in  the  future,  go  contrary  to  the  majority,  and 
harvest  the  crops  of  other  people's  planting.  The  advice 
once  given  by  a  merchant  of  broad  experience  to  a  young  man 
who  thought,  during  1893,  that  the  commercial  world  had  no 
bright  future,  "  never  to  sell  the  United  States  short  "  was 
most  sound.  That  young  man  held  on  to  his  goods  and  chat- 
tels and  saw  values  exceed  what  they  even  had  been  before. 

By  a  little  study  of  prices  ranging  long  enough  to  cover 
both  years  of  prosperity  and  depression,  some  notion  of 
relatively  high  and  low  security- values  may  be  had.  This 
done,  the  time  to  sell,  if  sell  one  must,  is  when  the  high  level 
seems  to  be  reached;  then  put  the  money  in  a  bank  and 
wait  until  the  swing  towards  low  prices  —  and  the  wait  may 
be  a  long  one  —  is  well  accomplished,  and  thus  the  time  to 
buy  is  at  hand.  But  buy  the  highest  grade,  standard  invest- 
ments, for  even  the  most  conservative  stocks  and  bonds  will 
then  be  found  at  cheap  figures. 

The  mere  fact  that  one  has  money  to  invest  is  no  argument 
for  so  doing  at  the  moment,  even  to  buy  the  best  the  market 
affords.  Ruling  prices  should  be  considered.  No  merchant 
would  stock  up  to  the  limit  of  his  financial  capacity  if  he 
considered  prices  exorbitantly  high;  he  would  leave  the  money 
in  his  bank  and  wait.  Why  should  not  the  investor  do  the 
same? 

Standard  investments  are  mentioned  in  the  second  para- 
graph preceding;  and  what  such  investments  are  is  a  subject 
to  ponder  on;  a  subject  which  State  legislators  are  con- 
stantly considering  in  order  to  enact  laws  to  safeguard  the 
investment  of  savings  bank  and  trust  funds.  A  person  who 
feels  wise  enough  to  divide  all  investments  into  two  classes: 
standard  or  safe  and  questionable  or  speculative,  is,  indeed, 
possessed  of  self-confidence.  Still  some  general  advice  can  be 
given  which  will  help  one  to  reach  a  fair  conclusion. 

A  man  blessed  with  a  moderate  property  sufficient  for  the 
welfare  of  his  family,  in  case  of  his  decease,  provided  the 
principal  should  suffer  no  shrinkage,  gave  his  wife  this  advice  — 
he  had  made  her  his  executrix  under  his  will,  and  it  would 
devolve  upon  her  to  manage  his  property  if  she  outlived 
him  —  "  buy  no  security  not  sanctioned  by  law  as  a  legal 
investment  for  Massachusetts  savings  banks."  Of  course, 
this  anticipated  no  less  conservative  laws  regulating  the 
investment  of  the  funds  of  such  institutions  than  at  the 


FOREWORD  xiii 

time  the  advice  was  given,  but,  perhaps,  on  the  whole,  no 
better  reading  of  the  future  could  have  been  undertaken,  and 
no  better  advice  given  in  so  few  words.  In  general,  the  laws 
regulating  the  investments  of  savings  banks,  as  now  in  force, 
in  such  other  States  as  New  York  and  Connecticut,  and,  to  a 
large  extent,  Maine,  Vermont,  and  New  Hampshire,  may  be 
used  as  guides  in  the  selecting  of  securities. 

Now,  many  will  say:  "  But  I  can't  live  on  such  small 
interest  returns  as  this  kind  of  securities  affords."  Quite 
right,  but  neither  can  they  afford  to  lose  any  of  their  capital. 
High  interest  rates  beget  loss  of  principal.  This  should  be  a 
motto  and  hung  as  conspicuously  in  the  household  of  those 
of  limited  means,  as  other  mottos  once  so  common  in  the 
New  England  home.  To  get  with  safety  better  than  3£% 
to  4%  interest  return  one  must  either  be  a  shrewd,  well- 
posted  person  in  financial  matters,  or  rely  upon  the  advice 
of  some  one  who  is. 

Misplaced  confidence  has  been  ruinous  to  the  small  fortunes 
of  thousands.  Undoubtedly  there  are  numerous  bonds  of 
Southern  and  Western  municipalities  as  well  as  bonds  of  public 
service  corporations,  which  present  a  minimum  of  risk,  paying 
from  4J%  to  5%,  but  buy  such  only  of  bankers  of  long 
experience  and  good  established  reputations,  and  who  are 
known  to  follow  carefully  rules  and  customs  which  years  of 
practice  have  fixed  as  proper.  It  is  partially  from  an  attempt 
to  explain  such  rules,  so  that  one  may  select  with  intelligence, 
that  the  contents  of  this  book  are  offered  to  the  reader. 

Again:  let  the  careful  thinker  consider  if  there  are  not 
certain  investments  based  upon  the  needs  of  this  nation  of 
great  resources  which  must,  in  the  very  nature  of  things,  be 
sound.  Who  was  it  that  once  said  "  a  man  will  see  a  fly  on 
a  barn  door  and  miss  the  door?  "  Look  at  a  map  of  the 
United  States ;  do  not  get  too  near  it;  one,  by  so  doing,  some- 
times sees  the  name  of  a  small  village,  but  does  not  see  county 
or  State  names,  which  are  in  large  letters.  Consider  this 
map  from  a  broad  and  general  standpoint;  grasp,  in  your 
mind's  eye,  the  enormous  traffic  of  this  country;  the  big 
arteries  of  transportation.  It  would  seem  that  the  bonds 
and  many  stocks  of  these  large  railroad  lines  must  be  reason- 
ably safe,  for  these  big  systems  carry  commerce  from  ocean 
to  ocean,  bringing  the  products  of  the  West  to  the  Eastern 
marts,  and,  also,  in  vast  quantities  for  shipment  to  the 
European  markets.  They,  likewise,  transport  the  manufactures 
of  the  East  to  the  West  as  well  as  to  the  steamship  lines, 
largely  controlled  by  these  same  railways,  which  pass  them 
on  to  the  Asiatic  countries.  Such  immense  traffic  as  this 
must  furnish  the  basis  for  sound  investment  if  anything  can. 

Unquestionably,  there  are  almost  countless  small  invest- 


xiv  MONEY   AND   INVESTMENTS 

ments,  here  and  there,  which  are  safe  and  very  profitable  in 
interest  return,  but  it  is  the  belief  on  the  part  of  so  many 
that  they  have  found  just  such  a  security  which  leads 
them  astray.  Better  follow  well-established  rules  and  not 
be  tempted  by  the  wayside.  No  one  may  gainsay  that  there 
are  not  many  gold  and  copper  mines  which  are  good,  very 
good,  but  how  often  does  the  outsider  get  a  chance  to  buy 
such  a  security  at  a  legitimate  price?  When  found  to  be  be- 
yond reasonable  risk  they  are  high  in  price.  Certainly,  they 
pay  more  than  3£%  or  4%,  but  it  takes  an  expert  to  pick 
out  the  good  ones  among  the  multitude  of  mining  issues  for 
the  benefit  of  the  kind  of  investor  referred  to  here.  It  is 
customary  for  reputable  banking  houses,  handling  mining 
securities,  to  first  have  the  properties  examined  by  com- 
petent engineers  and  other  well-known  experts.  When  this 
has  been  done,  they  have  gone  as  far  as  possible  for  the  pro- 
tection of  the  purchaser,  for  no  one  can  see  into  the  ground 
beyond  the  property  already  developed.  There  is  the  ever 
prevalent  element  of  risk  in  investments  of  this  class. 

If  the  temptation  to  buy  mining  investments  of  any  kind  is 
allowed  to  influence  one,  bear  one  very  important  point  in 
mind,  viz.,  that  a  mine  is  ever  consuming  itself,  —  so,  like- 
wise, are  such  properties  as  oil  wells,  quarries,  etc.,  —  and  at 
some  future  time  the  product  must  cease  altogether,  or  the 
mine  reach  a  depth  too  great  for  economical  production. 
The  shares  of  a  mine,  therefore,  should  not  be  valued  entirely 
by  dividends.  A  sufficient  allowance  should  always  be  made 
for  the  exhausting  of  the  mine's  resources.  In  case  of  a 
bonded  debt  upon  a  mining  property,  the  investor  should  be 
sure  that  there  is  a  sufficient  sinking  fund  set  aside  for  the 
payment  of  this  indebtedness,  which  sinking  fund  should  be 
ample  to  allow  for  the  reduction  in  the  mine's  value,  for  the 
reasons  given  above.  In  relation  to  mining,  it  is  probably 
true  that  "  more  money  has  been  put  into  the  ground  than 
has  been  taken  out  of  it." 

Do  not  be  argued  into  buying  a  mining  security  based  on 
the  location  of  the  mine  being  near  another  similar  property 
of  established  value. 

Let  not  the  fact  that  a  security  can  be  bought  at  a  dis- 
count —  less  than  its  face  value  —  alone  entice  you  to  a 
purchase.  That  in  itself  is  no  argument  to  buy.  It  should 
warn  one  even  to  a  more  careful  scrutiny  of  the  property 
back  of  the  investment.  It  is  a  well-known  fact  that  the 
suicidal  policy  of  buying  only  at  a  discount  wrecked  one 
savings  bank. 

Do  not  judge  the  value  of  shares  by  one  dividend  or  by  an 
increase  in  the  dividend  rate.  The  value  of  shares  based  on 
dividend  rates  can  only  be  ascertained  by  a  period  long  enough 


FOREWORD  xv 

to  test  the  corporation's  dividend  paying  ability  through  good 
times  and  bad.  A  corporation  which  has  been,  for  a  term  of 
years,  returning  4  %  per  annum  to  its  stockholders  and  selling 
at  $100,  enjoys  extraordinary  good  business  which,  for  the  time, 
warrants  the  increase  of  the  semi-annual  dividend  rate  from 
2%  to  2|%,  equal  to  5%  yearly.  Speculators  seize  this 
opportunity  to  force  the  price  of  the  stock  to  125,  at  which 
price  the  increased  dividend  rate  still  only  equals  4%  return 
upon  the  investment.  There  is  no  certainty  that  5%  can  be 
maintained,  nevertheless  up  has  gone  the  stock,  and  investors 
buy  it  more  greedily  at  125,  yielding  4%,  than  they  did  at  100, 
yielding  4%.  It  will  take  twenty-five  years  of  the  dividend 
increase  to  return  the  market  value  increase  of  the  stock. 
Perhaps  that  is  hardly  a  fair  way  of  putting  it,  but  it  may 
cause  people  to  hesitate  before  acting  according  to  the  belief 
that  one  swallow  makes  a  summer.  Stocks  are  forced  up  or 
down  in  the  market  upon  the  least  excuse,  and  those  close  to 
the  scene  of  action  make  money  at  the  expense  of  those  who 
allow  themselves  to  be  influenced  by  surface  appearances, 
and  who  do  not  probe  to  the  bottom  for  real  conditions. 

When  an  industrial  business,  which  has  been  conducted  as 
a  partnership,  is  changed  to  an  incorporated  company,  and 
the  public  is  invited  to  buy  its  securities,  the  intending  investor 
should  ask  himself:  "  Why,  if  the  business  was  such  a  good 
one,  did  the  old  firm  wish  to  let  the  public  into  its  profits?  " 
All  kinds  of  plausible  answers  can  be  given  to  such  questions, 
and  in  many  cases  the  incorporation  is  justified.  As  a  rule, 
however,  such  methods  of  financing  industrial  concerns  are 
best  justified  where  many  firms  or  corporations,  or  both 
together,  in  the  same  line  of  business,  are  united  under  one 
management  to  reduce  competition  and  expense.  It  is  the 
capitalization  of  a  single  firm  which  is  more  to  be  guarded 
against.  Even  in  the  consolidation  of  several  "  industrials," 
it  is  essential  to  consider  if  the  business  is  dependent  for  its 
success  upon  the  continued  management  of  some,  or  the 
greater  part,  of  the  original  owners.  If  so,  it  is  necessary, 
if  such  a  management  is  retained,  that  its  ownership  in  the 
stock  of  the  new  company  is  sufficient  to  continue  its  interest 
to  make  the  company  a  success,  or  some  plan  adopted  to 
insure  as  good  or  better  management  of  the  whole  as  the 
integral  parts  had  formerly.  In  this  connection,  the  reader 
will  do  well  to  turn  to  the  subject  "  Industrial  Securities." 

The  question  often  arises  as  to  the  advisability  of  investing 
money  for  a  long  or  a  short  time.  The  best  method  to  pursue 
depends  very  largely  upon  the  financial  condition  existing  at 
the  time  of  the  investment.  During  the  early  part  of  this 
year  (1907)  corporations  found  difficulty  in  selling  new  issues 
of  bonds  at  normal  prices.  Consequently,  they  issued  high 


xvi  MONEY   AND    INVESTMENTS 

rate  notes  running  from  one  to  three  years,  with  the  expecta- 
tion that  when  they  fell  due  the  condition  of  the  market 
would  be  such  as  to  permit  the  refunding  of  these  notes  by 
the  issue  of  long  time  low  rate  bonds  in  their  stead.  Other 
bonds  of  the  same  corporations  were  selling  upon  the  market 
at  extremely  low  figures.  Yet  what  did  the  public  do?  In- 
stead of  buying  the  bonds,  they  bought  the  notes  in  preference, 
thereby  enabling  the  corporations  to  profit  out  of  the  expected 
advance  in  the  bonds  to  be  issued  later,  rather  than  them- 
selves seizing  the  opportunity  with  similar  bonds  then  on  the 
market.  There  was  great  hesitation  on  the  part  of  the  in- 
vestors buying  bonds  at  the  then  low  figures;  but  when  they 
have  advanced  to  a  price  sufficient  to  warrant  the  issuing  of 
bonds  to  refund  the  note  issues,  then  will  they  be  readily 
purchased,  showing  again  that  the  public  acts  contrary  to 
good  judgment. 

Some  financiers  doubt,  however,  if  the  corporations  are 
judging  the  future  accurately  in  the  maturity  of  their  notes, 
reckoning  on  refunding  at  a  more  opportune  moment;  but 
that  matters  not  in  this  case,  as  it  is  the  principle  that  it 
is  desired  to  illustrate. 

From  the  above  it  is  very  easy  to  deduce  this  rule:  Buy 
short  time  securities  when  prices  are  high  and  the  net  return 
consequently  small,  and  buy  long  time  securities  when  prices 
are  low  and  the  net  return  high.  This  is  all  based  upon  every- 
thing else  being  equal;  that  is,  the  safety  of  the  security 
being  supposed  to  be  satisfactory. 

Why  do  so  many  people  buy  a  stock  in  some  little  known 
company  with  so  little  investigation?  Such  a  person  would 
not  buy  a  small  partnership  interest  in  a  business  of  long 
established  reputation  in  his  own  neighbourhood;  one  which 
he  had  every  reason  to  believe  prosperous,  without  the  most 
minute  investigation.  But  how  does  it  differ  from  the  other? 
The  stock  represents,  to  all  practical  purposes,  his  partnership 
in  the  incorporated  company.  Is  there  some  hypnotic  in- 
fluence in  the  names  "  stocks  "  and  "  bonds?  "  Or  is  it  the 
distance  which  lends  enchantment?  The  "  prophet  is  not 
without  honour  save  in  his  own  country,"  and  so,  perhaps, 
the  investor  believes  not  in  his  local  industries,  and,  perforce, 
must  seek  afar  for  an  outlet  for  his  money,  buying  on  the 
faith  of  some  newspaper  advertisement.  By  all  this  it  is  not 
meant  that  the  seeker  for  an  interest-bearing  security  should 
not  make  distant  investments.  Far  from  it,  but  either  he 
should  deal  with  a  firm  of  untarnished  and  long-established 
reputation  for  fair  dealings,  or  place  his  money  near  home 
in  properties  concerning  which  he  has  some  certain  knowledge. 
Choosing  neither  of  these  methods,  then  let  him  investigate 
with  as  great  care  as  would  the  deacon  in  a  horse  trade. 


FOREWORD  xvii 

There  are  enough  good  investments  regarding  which  full 
information  may  be  had  without  wasting  time  over  those  of 
uncertain  value,  and  facts  regarding  which  are  withheld  from 
the  searchlight  of  publicity. 

At  times  a  man  —  but  more  frequently  a  woman  —  says 
that  there  is  a  very  small  sum  of  money  to  live  on,  and  that 
it  is  extremely  necessary  to  get  as  high  a  rate  of  interest  as 
possible,  consistent  with  safety.  The  conscientious  banker 
often  advises  putting  the  money  in  some  good  savings  bank, 
or  buying  what  are  known  as  high  grade  investment  stocks  or 
bonds,  and  which  return  from  3%  to  4%  interest.  They  are 
the  next  degree  removed  from  Government  bonds  in  safety. 
The  customer  will  immediately  say  that  he  cannot  possibly 
live  on  such  a  rate  of  interest,  that  he  must  have  5%  or  6%. 
In  spite  of  all  arguing  and  urging  upon  the  part  of  the  banker 
he  will  insist  upon  this  interest  rate.  The  former,  against  his 
better  judgment,  and  contrary  to  his  strong  advice,  will 
select,  to  the  best  of  his  knowledge  and  belief,  a  security 
which  will  return  this  desired  rate  of  income  with  as  little 
risk  as  possible,  knowing,  all  the  time,  that  no  matter  how 
earnestly  he  tries  there  is  quite  an  element  of  risk.  Finally, 
the  investment  is  made;  all  goes  serenely  for  months,  perhaps 
years.  The  banker  may  do  as  well  as  he  can  to  "  keep  track  " 
of  this  investment,  and  often  succeeds  in  persuading  his 
customer  to  dispose  of  it  in  time  to  forestall  a  loss,  and, 
possibly,  secure  a  profit.  Frequently,  in  spite  of  his  best 
endeavours,  a  loss  will  occur,  and  then  his  troubles  begin.  He 
will  wish  a  dozen  times  that  he  had  absolutely  refused  in  the 
beginning  to  invest  the  money;  he  will  likely  at  the  time 
have  requested  the  man  not  to  invest  it  through  him.  The 
customer  may  have  replied:  "  Please  advise  me;  to  whom 
else  can  I  go  for  advice?  "  The  latter  is  apt  to  remember  very 
little  of  this.  The  banker  is  to  blame  from  the  other's  point  of 
view;  he  ought  to  have  known  that  something  was  going  to 
happen  to  this  security,  and  sold  it.  He  should  have  been 
more  than  human  in  his  ability  to  foresee  a  loss;  he  has 
neglected  his  duty.  There  have  been  numerous  cases  where 
so  little  did  the  investor  remember  the  conversation  which 
took  place  at  the  time  of  making  the  investment,  that  he  has 
heaped  upon  the  banker  the  unjust  accusation  of  having  urged 
the  purchase  of  the  security. 

Let  the  investor  assume  his  or  her  proportion  of  the  respon- 
sibility in  case  of  loss,  and  give  proper  credit  to  the  banker  in 
event  of  extraordinary  profits. 

Remember,  always,  that  your  investment  banker  is  not 
infallible;  for  it  is  not  possible  for  any  human  being  to  carry 
continually  in  his  mind  facts  in  relation  to  the  multiplicity 
of  securities  handled  by  him.  It  is  not  to  be  expected  that 


xviii  MONEY   AND   INVESTMENTS 

he  can  be  constantly  and  at  all  times  fully  acquainted  with 
every  detail  and  ready,  upon  call,  to  decide  upon  the  merits 
of  any  question  raised  by  his  clients.  Especially,  in  times  of 
financial  panics,  is  it  impossible  for  him  to  give  many  issues 
which  have  passed  through  his  hands  proper  attention.  It 
is  natural  that  occasionally  some  one  must  err,  and  it  is  fair 
that  the  client  should  consider  that  he  is  only  one  among 
hundreds  and,  perhaps,  thousands  of  other  clients  which  the 
banker  has  to  consider. 

Now  and  then  the  purchaser  of  a  security,  particularly  a 
bond,  may  not  have  money  available  for  investment  for  some 
little  time.  The  banker,  as  an  inducement  to  him  to  make  a 
purchase,  may  offer  to  sell  the  bond  deliverable  at  some  later 
date  to  be  agreed  upon,  merely  charging  the  purchaser  the 
accrued  interest;  i.e.,  the  rate  which  the  bond  bears  until  the 
date  upon  which  he  makes  payment.  Suppose,  however,  the 
matter  is  reversed,  and  the  purchaser  requests  this  accom- 
modation on  the  part  of  the  banker.  In  the  meantime, 
interest  rates  —  market  prices  for  money  —  advance  con- 
siderably, so  that  it  is  evident  that  the  banker  must  have 
been  losing  money  in  "  carrying  "  the  bond  for  the  customer 
at  the  "  accrued  interest  "  rate.  Under  these  circumstances 
it  would  be  perfectly  proper,  and  really  morally  obligatory, 
on  the  part  of  the  investor  to  offer  to  pay  an  additional  rate 
of  interest,  for  the  time,  sufficient  to  compensate  the 
banker. 

In  considering  the  advisability  of  selling  a  security,  the 
original  cost  of  it  should  not  be  given  too  serious  consideration, 
especially  if  the  cost  were  such  as  to  show  a  loss.  If  it  is  a 
proper  time  to  dispose  of  it,  the  cost  should  be  left  out  of  the 
question.  Ask  yourself  whether  or  not  you  would  buy  at  the 
present  quotation,  and  if,  for  good  reasons,  you  can  decide  in 
the  negative,  is  it  not  a  fair  argument  to  sell?  This  does  not 
mean  that  money  is  not  often  made  by  waiting,  for 
all  facts  in  relation  to  any  particular  security  have  to 
be  taken  into  consideration  in  thinking  of  selling  it  as  above 
indicated,  but  the  mere  fact  that  it  costs  more  than  you 
would  give  for  it  is  no  reason  for  delaying  its  sale. 

That  is  the  point  it  is  desired  to  make  clear,  for  probably 
much  unnecessary  loss  has  been  incurred  by  those  unwilling 
to  take  a  small  one,  but  who  have  held  on  and  then  taken 
a  greater  one  in  the  end.  And  all  just  because  they  allowed 
themselves  to  be  influenced  by  the  original  cost. 

When  you  purchase  a  stock,  bond,  mortgage,  or  whatever 
it  may  be,  read  it;  see  what  conditions  it  contains.  You 
may  find  therein  some  clause  detrimental  to  your  interests. 
It  would  not  be  hard  to  cite  cases  in  which  the  holder  of  some 
stock  certificate  has  suddenly  discovered  that  it  carried  con- 


FOREWORD  xix 

ditions,  plainly  stated,  had  he  taken  the  pains  to  look,  which 
entailed  hardships  upon  him. 

It  is  not  unusual  for  an  investor  to  spend  hours  and,  per- 
haps, days  in  patient  thought  and  study  in  seeking  what  he 
deems  a  safe  purchase,  and  then,  at  the  last  moment,  spend 
scarcely  any  time  in  the  scrutiny  of  the  paper  itself. 

When  a  banking  firm  buys  an  issue  of  bonds,  or  similar 
security,  from  any  corporation  which  is  not  by  law  compelled 
to  furnish  public  statements  of  its  earnings  from  time  to 
time,  or  where  the  corporation  is  of  such  magnitude 
that  it  is  customary  to  furnish  a  statement  of  its  earnings  to 
the  public,  such,  for  instance,  as  the  United  States  Steel 
Corporation,  it  is  important  that  a  contract  be  executed 
between  the  corporation  placing  its  securities  and  the  banking 
house  purchasing  the  same,  whereby  the  latter  shall  receive 
semi-annually  or  yearly  sworn  statements  of  the  earnings  of 
the  company  and  its  financial  condition  during  the  time  which 
the  issue  of  securities  may  be  outstanding.  Furthermore, 
that  the  banking  house  shall,  for  a  like  period,  have  access  to 
the  books  of  the  corporation  at  any  time  for  the  purpose  of 
auditing  its  accounts  and  verifying  its  statements. 

The  reason  for  this  is  perfectly  clear:  It  affords  a  means 
of  protection  to  the  bondholder,  for  in  case  the  earnings  of 
the  property  during  the  life  of  the  security  seem  to  be  falling 
off,  it  will,  by  the  banking  house  receiving  a  statement  of 
such  earnings,  be  made  known  to  it  and  afford  an  opportunity 
for  self-protection.  It  is  no  more  than  right  that  the  parties 
lending  the  money,  by  which  the  corporation  is  able  to 
operate,  should  be  in  possession  at  all  times  of  adequate  in- 
formation to  judge  whether  or  not  the  property  is  being 
properly  managed. 

Remember,  at  all  times,  that  nothing  is  more  sensitive  to 
conditions  and  impressions  than  the  security  market.  This 
is  well  illustrated  in  the  actual  happening  of  a  woman  who 
possessed  $5,000  in  bonds  of  a  small  issue  in  one  of  the  New 
England  cities.  The  issue  was  a  perfectly  sound  one,  but  was 
held  closely  by  investors,  and  the  bonds  seldom  offered  for 
sale.  The  woman  desired  to  dispose  of  them,  and  went  to  her 
banker  in  New  York  City  and  asked  him  to  obtain  a  bid.  He, 
naturally,  put  himself  in  touch  with  one  of  the  local  brokers 
of  the  city  wherein  the  corporation  itself  was  located.  This 
broker  went  from  bank  to  bank  and  from  banker  to  banker 
to  get  the  best  bid  obtainable.  The  woman,  in  the  mean- 
time, had  gone  to  not  less  than  six  other  bankers  in  New 
York  with  the  same  request.  They,  in  turn,  had  each  sought 
some  local  broker  in  the  New  England  city,  and,  each  pursuing 
like  tactics  to  the  first  mentioned,  it  was  not  long  before  there 
seemed  an  avalanche  of  the  bonds  of  that  particular  cor- 


xx  MONEY   AND    INVESTMENTS 

poration.  It  seemed  that  there  were  more  bonds  for  sale 
than  the  outstanding  issue.  The  result  was  that  intending 
purchasers  became  suspicious  and  all  bids  were  withdrawn. 
The  woman  was  unable,  for  the  time  being,  to  obtain  any 
market  whatsoever. 

In  this  connection  it  may  be  pertinent  to  say  that  in  the 
case  of  an  issue  of  securities  unknown  in  the  market  where 
they  are  offered  for  sale,  the  fact  of  not  being  able  to  find  a 
purchaser  does  not  argue  that  anything  is  wrong. 

In  comparing  earnings,  one  month  with  another,  always 
compare  with  the  corresponding  month  of  the  year  preceding, 
as  that  is  the  true  test.  If  the  corporation  is  one  of  long 
standing,  it  is  advisable  to  examine  into  its  earnings  during 
a  past  period  of  business  depression,  and  to  see  how  it 
"  weathered  the  storm." 

In  the  placing  of  money  for  investment  purposes,  in  addi- 
tion to  the  foregoing,  these  are  some  of  the  general  principles 
which  should  be  considered: 

The  standing  of  the  men  in  charge  of  the  corporation;  the 
location  of  the  property  and  the  character  of  the  country 
upon  which  it  is  dependent  for  its  business;  especially  is  it 
increasing  in  population  and  wealth,  or  the  reverse?  If  it  is 
a  municipal  bond  that  is  being  considered,  it  is  not  advisable 
to  place  too  much  confidence  in  a  municipality  which  is  so 
located  as  to  be  entirely  dependent  upon  lumber  business, 
oil  wells,  or  some  special  form  of  mining;  that  is,  a  stability, 
not  likely  to  be  furnished  under  such  conditions,  is  needed. 
An  agricultural  section  is  far  better  and  more  permanent 
than  gold  mining.  A  study  of  the  earnings  has  already  been 
advised. 

Present  competition,  or  the  likelihood  of  the  same  in  the 
future,  is  very  important.  Is  the  corporation  charging  ex- 
cessive rates  so  as  likely  to  invite  competition?  Are  its 
earnings  based  upon  patents  which  may  be  approaching  ex- 
piration? 

It  goes  without  saying  that  the  condition  of  the  money 
market  at  the  time  of  purchase  must  always  be  considered. 

But  when  all  is  said,  most  business  must  rest  upon  faith  in 
someone,  and,  therefore,  the  character  of  your  banker  is  all- 
important. 

This  chapter  thus  far  has  been  written  mainly  with  the 
idea  of  assisting  those  desiring  to  make  careful  and 
conservative  investments.  The  author,  nevertheless,  under- 
stands that  there  are,  and  always  will  continue  to  be,  those 
who  speculate,  and,  possibly,  some  of  the  essential  points  in 
relation  to  speculation  may  be  acceptable,  and  here  follow. 

Stock  market  prices,  which,  like  the  ocean,  are  never  at 
rest,  are  influenced  by  many  forces.  If  one  is  to  be  even  an 


FOREWORD  xxi 

occasional  buyer  or  seller  in  the  securities  of  the  speculative 
world,  he  cannot  have  too  clear  an  idea  as  to  these  factors. 
Monetary  conditions,  business  conditions,  and  stock  market 
manipulation,  together  with  the  political  outlook,  both  domes- 
tic and  foreign,  are  important  subjects  for  study.  Always 
remember  that,  although  values  are  largely  determined  by 
business  conditions,  prices  may,  for  the  time  being,  move  at 
variance  with  basic  principles.  Prices  in  the  long  run  do, 
nevertheless,  follow  the  course  of  existing  values.  (Many  of 
the  subjects  mentioned  in  this  connection  will  be  found  treated 
in  the  main  part  of  the  book,  so  they  may  be  lightly  touched 
upon  here.) 

It  is  evident  that  "  business  conditions  "  is  a  broad  subject, 
but  there  are  certain  underlying  principles  which  may  be 
taken  as  an  infallible  guide,  namely: 

First:  The  crops  —  of  main  importance  —  the  principal 
of  which,  grain  and  cotton,  have  a  tremendous  influence  upon 
business  prosperity. 

Second:  The  iron  and  steel  industries.  It  is  well  under- 
stood, and  almost  a  tradition,  that  when  these  trades  are 
prosperous,  other  departments  of  industry  are  fully  occupied. 
The  reverse  is  equally  true. 

Third:  Watch  the  railroad  earnings.  They  are  a  singularly 
good  index  of  the  times.  Busy  railways  and  good  earnings 
mean  work  for  the  steel  companies,  car  and  locomotive  builders, 
etc.  Beware  of  the  continued  steady  decline  from  month  to 
month  of  these  figures.  The  rise  and  fall  in  stock  prices  have 
always  closely  followed  the  rise  and  fall  in  railroad  earn- 
ings. 

Fourth:  Study  the  bank  clearings.  They  reflect  business 
conditions  wonderfully  well.  The  clearings  of  the  country  at 
large  are  better  to  follow  than  those  of  a  particular  city  which 
may  be  temporarily  affected  by  a  speculative  craze. 

Fifth:  What  are  known  as  "  swings  "  from  prosperity  to 
depression  and  the  reverse.  It  is  a  well  known  fact  that  the 
business  of  every  country  passes  through  alternate  periods 
of  rising  prices  and  prosperous  times  and  then  falling  values 
and  hard  times.  It  behoves  one  to  always  estimate,  as  well 
as  may  be,  at  about  what  point  in  one  of  these  cycles  he 
happens  to  be. 

"  Monetary  conditions  "  have  reference  to  the  supply  of, 
and  demand  for,  money;  the  effect  of  an  increasing  supply 
upon  the  rise  in  prices  of  commodities;  and  the  fact  that  low 
money  rates  may  encourage  speculation.  Money  is  the 
representative  in  value  of  all  things  traded  in,  and  the  scarcity 
of  it  does  not  tend  to  improve  business  conditions,  yet,  at  the 
same  time,  very  low  money  rates  may  argue  poor  business, 
as  it  shows  a  lack  of  demand.  The  comparative  study  of  the 


xxii  MONEY  AND   INVESTMENTS 

daily  quotations  of  interest  paid  for  "  call  "  and  "  time 
loans"  is  desirable. 

As  to  "political  conditions;"  we  are  always  dependent 
upon  wise  and  sane  government  at  Washington;  we  are  sen- 
sitive to  war  clouds,  even  if  not  at  first  involving  our  own 
country.  The  successful  speculator  has  world-wide  conditions 
to  dwell  upon  now-a-days,  as  the  large  nations  are  so  closely 
associated  in  money  and  industrial  matters  that  each  is  more 
or  less  dependent  upon  the  continued  well-being  of  the  other. 
The  searching,  daily  reading  of  domestic  and  foreign  hap- 
penings is  essential. 

Stock  market  manipulation  is  fully  explained  under  the 
subject  "  Manipulation,"  and  is  something  to  be  carefully  and 
seriously  considered,  and  ever  borne  in  mind  by  whosoever 
attempts  to  pick  his  way  among  the  snares  and  pitfalls  of 
Wall  and  State  Streets. 

There  are  some  shrewd  investors  who  avoid  the  placing  of 
money  in  any  enterprise  of  capitalization  large  enough  to 
attract  the  attention  of  Wall  Street,  and  thereby  become, 
possibly,  a  puppet  in  the  hands  of  some  soulless  "  clique." 
They  think  it  better  to  invest  in  smaller  companies,  whose 
securities  are  offered  and  recommended  by  reputable  bankers, 
or  in  local  issues;  in  either  case,  the  amount  of  the  issues 
being  too  small  to  warrant  manipulation. 

It  is  a  peculiar  truth  that  the  general  public  usually  buys 
while  prices  are  rising,  instead  of  waiting  for  moderate  re- 
actions. It  is  better  wisdom  to  buy  after  there  has  been  a 
decline,  and  to  sell  after  a  sustained  advance;  but  the  public 
appears  never  to  learn  this  rule. 

Activity  argues  for  rest;  every  excess  is  sure  to  be  followed 
by  its  opposite.  Depression  follows  inflation;  and  the  latter 
precedes  depression. 

Nelson  says  in  his  "  A  B  C  of  Stock  Speculation:  " 

"  The  elder  Rothschilds  are  said  to  have  acted  on  the 
principle  that  it  was  well  to  buy  a  property  of  known  value 
when  others  wanted  to  sell,  and  sell  when  others  wanted  to 
buy." 

And  also,  "  that  if  your  stock  has  been  purchased  and  it 
goes  up,  it  is  well  to  wait;  but  if  it  goes  down,  it  is  well  to 
stop  the  loss  quickly  on  the  ground  that  the  theory  on  which 
the  purchase  was  made  was  wrong.  The  public,  as  a  whole, 
exactly  reverses  this  rule.  The  average  operator,  when  he 
sees  two  or  three  points  profit,  takes  it;  but,  if  the  stock  goes 
against  him  he  holds  on  waiting  for  the  price  to  recover,  with, 
oftentimes,  the  result  of  seeing  a  (small)  loss  .  .  .  run  into 
a  loss  of  ten  points.  He  then  becomes  discouraged  and  sells 
out  near  the  bottom." 

A  financial  writer  gives  expression  to  the  following: 


FOREWORD  xxiii 

"  Value  has  little  to  do  with  temporary  fluctuations  in 
stock  prices,  but  is  the  determining  factor  in  the  long  run. 
Values,  when  applied  to  stocks,  are  determined,  in  the  end, 
by  the  return  to  the  investor,  and  nothing  is  more  certain 
than  that  the  investor  establishes  the  price  of  stocks.  The 
manipulator  is  all-powerful  for  a  time.  He  can  mark  prices 
up  or  down.  He  can  mislead  investors,  inducing  them  to 
buy  when  he  wishes  to  sell,  and  to  sell,  when  he  wishes  to 
buy;  but  manipulation  in  a  stock  cannot  be  permanent,  and 
in  the  end  the  investor  learns  the  approximate  truth." 

Wall  Street  always  builds  on  the  future,  not  on  what  has 
gone.  It  always  wants  a  change  in  security  values.  Either 
way  is  acceptable  to  the  professional  trader  if  only  he  can  get 
on  the  track  of  the  right  way  in  advance,  and  Wall  Street 
thus  act  before  the  public. 

And  yet,  thousands  buy  stocks  who  should  not.  Some  buy 
because  others  do.  Some  because  the  daily  quotations  show 
a  tremendous  apparent  buying  on  the  part  of  others  of  a 
stock  at  the  moment  attracting  attention.  They  are  ignorant 
of  the  fact  that  many  of  the  reported  sales  are  not  genuine, 
but  "  wash  sales,"  i.e.,  fictitious:  trades  made  in  the  open 
market,  and  quoted,  by  parties  between  whom  there  is  a 
private  agreement  that  they  shall  be  void;  all  part  of  the  fine 
art  of  manipulation.  Some  one  has  said  that  "  ignorance 
and  credulity  are  at  the  bottom  of  most  losses  in  speculation," 
and  he  said  well. 

The  writer's  idea  of  enumerating  in  the  foregoing  matter 
some  of  the  things  necessary  for  the  successful  speculator  of 
the  present  day  to  be  posted  upon,  and  some  of  the  things 
for  him  to  consider,  is  to  cause  him  to  give  time  for  thought 
and  consideration  before  making  a  purchase  or  sale  ;  to  cause 
him  to  think  for  himself,  act  more  upon  his  own  responsibility 
and  less  upon  what  he  may  read  and  hear.  The  average 
stock-exchange  broker  is  sometimes  so  near  the  scene  of 
action  that,  however  honestly  inclined  he  may  be,  he  may 
fail  in  his  judgment. 

In  the  preceding  pages  emphasis  is  laid  upon  the  investor 
selecting  a  banking  house  of  long  experience  and  established 
reputation  with  which  to  conduct  his  dealings.  That  same 
advice  is  most  strenuously  offered  for  those  who  desire  to 
speculate,  and  still  greater  stress  is  laid  upon  this  point  in 
the  following  chapter. 

Finally,  a  few  suggestions  which  are  almost  personal  in 
their  character: 

Keep  a  record  in  some  form  —  either  by  the  stubs  of  your 
check-book,  or  by  a  simple  system  of  bookkeeping  —  of  your 
receipts  and  expenditures,  and  balance  at  stated  intervals 
to  find  where  you  stand. 


XXIV 

Do  not  destroy  receipts;  they  should  be  kept  at  least  six 
years. 

Do  not  allow  a  bill  which  is  found  correct  and  deserving  of 
payment  to  remain  unpaid  more  than  twenty-four  hours. 

Do  as  little  business  as  possible  with  friends  and  relatives; 
but,  when  so  doing,  conduct  it  upon  strictly  businesslike  prin- 
ciples. 

Always  retain  copies  of  business  letters  sent  as  well  as  the 
originals  of  all  received,  having  some  system  of  filing  the 
same. 

In  changing  your  address,  notify  all  institutions  or  bankers 
with  whom  you  have  any  financial  dealings,  and  send  notice 
to  all  corporations  in  which  you  are  a  stockholder;  likewise 
corporations  or  municipalities  of  which  you  happen  to  be  a 
registered  bond  holder. 

Always  write  a  telegram  without  punctuation  marks. 
Then,  if  it  reads  clearly,  send  it. 

If  anybody  is  to  do  considerable  investing,  some  form  of 
filing  information  relating  to  the  same,  annual  reports  of  the 
different  corporations,  etc.,  is  desirable. 

Listed  below  are  certain  subjects  which  will  be  found  in  the 
body  of  the  book  and  which  those  of  limited  experience  in 
investment  or  money  matters  may  read  in  connection  with 
the  foregoing: 


Accrued  Interest  Guaranty 

Assessed  Valuation  Indorsed  Bonds 

Attorney's  Opinion  Manipulation 

Auditor  Mortgage 

Bonded  Debt  Net  Return  upon  the  Investment 

Bond  Values  Tables  Note 

Bucket  Shop  Optional  Bonds 

Care  of  Securities  Par 

Coupons  —  Collection  of  Protest 

Discretionary  Accounts  Registered  Bond 

Double  Liability  Serial  Bonds 

Engineer's  Certificate  Sinking  Fund 

Engineer's  Report  Tipster 

Franchise  Transfer  in  Blank 

Fully  Paid  Transfer  of  Stock 

In  Relation  to  Banking 

Bank  Account  Draft 

Bank-Book  How  to  Open  a  Savings  Bank  Account 

Check  Indorse 

Check-Book  Overdraw 

Deposit  Stop  Payment 

Miscellaneous 

Interest  Will 

Fire  Insurance  Woman's  Signature 


Ill 

POWER    OF   THE    FINANCIAL   WORLD    AND   ADVERTISEMENTS 

THE  power  of  the  financial  world,  as  managed  from  New 
York,  Paris,  and  London,  and  possibly  other  large  financial 
centres,  is  such  that  a  note  of  warning  may  be  sounded  here 
to  advantage. 

Without  the  aid  of  the  newspapers  comparatively  little 
manipulating  the  market  or  shaping  public  opinion  in  line 
with  desires  of  the  large  powers  in  finance  could  be  accom- 
plished. 

Readers  of  newspapers  should  not  be  too  often  led  astray 
in  forming  their  opinions  as  to  their  acts  relating  to  money 
and  investments.  The  financial  leaders  are  so  all-powerful 
that  news  of  an  influencing  nature  can  be  circulated  broadcast 
throughout  the  newspapers  of  the  world  without  the  manage- 
ment of  such  papers  realizing,  perhaps,  that  their  columns  are 
being  used  for  this  object.  One  example  of  this  nature  will, 
possibly,  suffice  to  indicate  the  breadth  of  this  power: 

It  will  be  recalled  that  during  the  spring  of  1905  a  Japanese 
loan  was  offered  for  public  subscription  in  London  and  New 
York.  Just  previous  to  its  issue  the  papers  in  Europe  and 
America  teemed  with  news  indicating  an  early  peace  between 
Russia  and  Japan.  Telegrams  were  quoted  from  many 
European  capitals,  and  the  average  investor  was  led  to  believe 
that,  on  account  of  an  early  and  impending  peace,  the  Japanese 
bonds  would  be  an  attractive  purchase  at  the  issue  price. 
The  loan  was  enormously  over-subscribed,  then  peace  news 
ceased  immediately;  in  fact,  within  twenty-four  hours  after 
the  closing  of  the  subscriptions  all  indications  of  peace  were 
authoritatively  denied  by  both  Japan  and  Russia.  It  is 
impossible  to  state  that  this  was  all  done  with  an  object,  but 
the  finger  of  suspicion  strongly  points  that  way. 

Now  a  word  as  to  advertisements  and  the  gullibility  of  the 
American  public.  Do  the  people  really  like  to  be  fooled? 
One  is  almost  inclined  to  think  so,  or  why  do  these  adver- 
tisements appear  in  such  large  type  and  at  such  immense  cost 
to  the  advertiser  if  they  do  not  pay?  What  is  the  motive 
behind  all  these  philanthropists  of  finance;  men  who, 
at  great  sacrifice  and  cost  to  themselves,  are  willing  to  dis- 


xxvi  MONEY   AND    INVESTMENTS 

credit  so  many  investments,  and  to  save  the  public  from  loss 
in  buying  such?  Can  it  be  possible  that  these  same  "  saviours 
of  the  people  "  can  have  any  object  in  depressing  prices  of 
the  securities  referred  to?  Can  it  be  possible  that  they  have 
some  stocks  or  bonds  of  their  own  to  sell?  How  many  things 
are  done  in  this  world  without  an  object?  Banking  houses 
of  long  standing  and  integrity  do  not  appear  in  print  and 
publicly  abuse  other  people's  goods.  Well-known  stocks 
and  bonds  do  not  need  long  columns  of  praise.  A  mere  state- 
ment of  facts  suffices;  description  of  the  security;  statement 
of  earnings,  etc.  Beware  of  advertisements.  It  is  strange 
that  the  very  fulsomeness  of  so  many  of  them  does  not  in 
itself  warn  people  away.  Beware  of  advertisements  of  a 
security  wherein  the  reader  is  told  that  he  can  only  buy  at 
the  price  then  offered  for  a  certain  limited  period,  after  which 
it  will  be  advanced  to  a  certain  named  higher  price.  Columns 
of  "  financial  advice  "  and  "  logic  "  are  better  left  unread. 
Advertisers  thrive  on  the  gullibility  of  the  human  race. 


IV 

BANKS 

IT  is  not  surprising  that  many  persons  hesitate  in  the 
making  of  a  deposit  in  a  savings  bank,  on  account  of  the 
many  defalcations  continually  taking  place  throughout  the 
country.  Undoubtedly  there  are  thousands  of  persons  who 
look  with  suspicion  upon  the  majority  of  bank  treasurers,  as 
well  as  cashiers,  especially  in  what  are  known  as  country 
banks.  Unquestionably  it  behoves  the  depositor  to  select 
his  bank  with  the  same  care  that  he  would  select  an  in- 
vestment. 

It  is  not  the  desire  of  the  writer  to  undermine  faith  in  bank- 
ing institutions;  as  a  rule,  they  are  the  safest  places  in  which 
the  majority  may  intrust  their  money.  A  less  percentage  of 
risk,  in  the  long  run,  is  probably  incurred  in  a  savings  bank 
deposit  than  in  any  other  investment  paying  an  equal  interest 
return.  Everything  else  being  equal,  it  is  wise  to  deposit  in 
a  bank  in  which  the  officer  who  is  the  leading  spirit  and 
responsible,  to  a  great  extent,  for  its  funds,  is  a  man  not 
absolutely  dependent  upon  the  salary  which  he  draws  from 
such  management,  UNLESS  THE  SALARY  is  A  GOOD  ONE.  The 
handling  of  large  amounts  of  money  belonging  to  other  people 
is,  and  must  always  be,  a  temptation  to  many,  but  that 
temptation  is  greatly  lessened  when  such  funds  are  handled 
by  persons  who  have  practically  all  they  need,  and  who  do 
not  feel  the  want  of  many  things  which  the  possession  of  some 
of  the  bank's  funds  would  enable  them  to  enjoy. 

The  writer  would  make  no  deposit  in  any  banking  institu- 
tion which  did  not  also  pay  other  officials  and  clerks  a  suffi- 
cient compensation  to  give  them  a  decent  and  respectable 
living,  without  the  necessity  for  stealing,  and  it  is  due  to  just 
this  short-sighted,  narrow-minded  policy  of  underpaying 
which  has  resulted  in  so  many  disasters.  It  does  not  stand 
to  reason  that  every  man  will  resist  the  temptation  of  handling 
funds  in  the  hundreds  of  thousands,  and  at  the  same  time 
live  upon  a  salary  which  frequently  forces  him  to  economize, 
in  order  to  maintain  a  social  standard  at  the  level  with  the 
respectable  position  which  a  bank  official  is  supposed  to 
occupy.  The  handling  of  large  sums  of  money  is  a  vast 

xxvii 


xxviii  MONEY    AND    INVESTMENTS 

responsibility,  and  small  salaries  cannot  employ  sufficiently 
capable  persons  to  undertake  it.  The  fault  of  this  largely 
rests  with  the  directors  who  are  striving  to  handle  the  banks 
at  a  minimum  of  expense  in  order  to  keep  up  dividends  as 
high,  or  higher,  than  their  neighbours.  It  takes  courage  to 
reduce  dividends  in  savings  banks,  but  the  long  run  shows 
that  those  who  have  had  the  courage  to  make  a  reduction, 
although,  perhaps,  temporarily  losing  deposits,  have  proved 
to  be  worthy  of  the  confidence  of  the  people,  and  to  have 
built  up  large  resources  and  institutions  of  undoubted  strength. 

The  presidents  and  directors  of  banks  are  themselves,  in 
another  way,  often  indirectly  responsible,  and  very  much  so, 
for  their  officials  and  clerks  becoming  defaulters.  The  pos- 
session of  the  control  of  a  million  or  more  of  dollars  belonging 
to  a  bank  is  a  source  of  power  to  those  who  can  control  its 
investment.  The  officials  so  controlling  it  must  be  good 
clients  to  any  banking  house  through  whom  they  choose  to 
invest  the  bulk  of  this  money,  and  it  is  a  self-evident  fact 
that  they  will  obtain  opportunities  for  judicious  investment 
of  their  own  funds  through  an  earnest  desire  on  the  part  of 
the  banking  house  to  place  such  opportunities  before  them. 
The  lesser  officials  of  the  bank,  therefore,  become  aware  that 
some  of  their  superiors  are  very  profitably  making  outside 
investments.  They  see  small  and,  in  some  cases,  considerable 
fortunes  made  in  this  way.  This  book  does  not  question  the 
honesty  of  such  fortunes,  but  the  temptation  on  the  part  of 
the  underpaid  lesser  officials  of  the  bank  to  do  the  same 
thing  leads  to  the  downfall  of  many  of  them. 

Let  the  directors  look  to  many  such  points  as  are  suggested 
above  and  there  will  be  fewer  thieving  officials  in  their  em- 
ploy. There  is  no  doubt  that  many  of  the  defalcations  can 
be  attributed  indirectly  to  the  laxity  of  directors  of  the  banks 
in  which  they  occur,  if  the  careful  examining  into  the 
history  of  a  great  many  actual  happenings  is  any  proof. 

William  B.  Ridgely  expressed  much  the  same  idea  when  he 
said: 

"  The  ruin  of  a  bank  is  practically  always  the  result  of 
fraud,  or  the  use  of  its  funds  in  unlawful  amount  by  its 
officers  and  directors.  The  money  is  sometimes  lost  in 
legitimate  enterprises,  through  bad  judgment  and  mis- 
management, but  far  the  most  frequent  cause  for  actual 
stealing  or  defalcation  in  banks  is  speculation.  It  is  specu- 
lation which  is  the  curse  of  the  day,  which  tempts  so  many  men 
beyond  their  endurance."  ..."  No  man  who  assumes  the 
responsibility  of  the  custody  of  funds  belonging  to  others 
should  take  the  risk  of  subjecting  himself  to  this  tempta- 
tion, nor  allow  others  with  whom  he  divides  such  a  trust  to 
do  so." 


FOREWORD  xxix 

The  writer  ventures  the  statement  that  most  bank  troubles, 
such  as  the  above,  occur  on  a  declining  market.  It  is  human 
nature  to  speculate  for  a  rise  in  prices,  and,  as  a  result,  many, 
who  are  speculating  with  the  funds  of  others,  are  successful 
when  prices  advance.  But  let  a  long  period  of  declining 
prices  set  in,  and  then  the  daily  papers  will  begin  to  exhibit 
startling  headlines  of  exposures  and  suicides. 

The  average  State  savings  bank  report  gives  much  infor- 
mation of  value  to  such  as  care  to  investigate  the  banks  of 
any  particular  State.  These  books  may  usually  be  obtained 
from  the  Bank  Commissioners  at  the  several  State  Capitols. 

The  reader  will  find  other  matter  pertinent  to  this  subject 
under  "  Savings  Banks." 


PROSPERITY   AND  THE  FUTURE 


THESE  are  times1  of  great  prosperity.  The  swing  of  the 
pendulum  has  been  steady  and  far  out  from  the  perpendicular. 
How  much  farther  it  will  go,  and  how  long  stay  at  rest,  before 
beginning  its  inevitable  return  swing  is  not  for  man  to  safely 
prophesy.  1896  was  the  low  ebb  of  the  last  period  of  depres- 
sion, and  since  then  the  march  of  increasing  riches  and  good 
times  has  had  but  little  interruption.  But  the  end  will  come; 
the  downward  movement  will  follow  this  era  of  inflation  as 
certainly  as  the  winter's  cold  grips  the  Arctic  Circle  in  its 
clasp  of  ice  and  snow.  Benner,  the  prophet  of  panics,  claims 
that  one  is  due  in  1911.  However  that  may  be,  all  good 
financiers  should  put  their  houses  in  order  and  prepare  for 
one  in  the  not  very  distant  future.  Benner  may  have  set  the 
date  too  early,  or  he  may  have  erred  in  the  other  direction. 

Let  us  take  brief  stock  of  our  riches:  we  may  be  so  laden 
with  wealth,  and  the  money  powers  may  have  things  so  well 
in  hand  that  there  never  will  be  as  continued  a  period  of  low 
prices  and  hard  times  as  preceded  1896. 

TEN  YEARS'  GROWTH 

The  Journal  of  Commerce  publishes  the  following  table  of 
statistics  showing  the  growth  of  the  United  States  in  the  past 
ten  years,  compiled  from  the  latest  available  sources: 


Population 
Agricultural  products 
Manufactures  2 
Mineral  products  s 
Imports,  Fiscal  year 
Exports,  Fiscal  year 
Railroad  mileage 
Railroad  stock 
Railroad  bonds 


P.  ct. 

1905 

1895   Inc. 

83,609,000 

70,253,000   19 

$6,415,000,000 

$4,189,000,000   53 

$16,000,000,000 

$11,000,000,000   45 

$1,289,660,000 

$526,838,000  145 

$1,117,512,000 

$779,724,000   43 

$1,491,744,000 

$863,200,000   73 

211.000 

187,000   18 

$6,447,000,000 

$5,027,000,000   28 

$7,475,000,000 

$5,605,000,000   33 

1  Latter  part  of  1906. 

2  Estimate. 

3  1904  and  1894. 

XXX 


FOREWORD 


XXXI 


Railroad  Net  Earnings 
Railroad  Freight  ton  mileage  * 
Lake  commerce,  freight,  net  tons 
Money  in  circulation 
Bank  Clearings 
Bank  loans 


The  Minneapolis  Journal  of  August  31,  1905,  gave  the 
following  figures;  from  which  it  is  worthy  to  note  that  we 
are  no  longer  a  "  one  crop  country."  These  cover  the  three 
States  of  Minnesota,  North  Dakota  and  South  Dakota,  only. 


$639,000,000 
173,613,000,000 
2     44,270,000 
$2,653,000,000 
$142,869,000,000 
$1,001,000,000 

$317,000,000  101 
82,289,000,000  111 
15,062,000  193 
$1,602,000,000   65 
$53,348,000,000  167 
$489,000,000  104 

1905 
Wheat 
Oats 
Corn 
Flax 
Barley 
Rye 


Total 

Hay  —  Tons 

Potatoes 


Bushels 

182,296,800 

154,492,000 

95,863,500 

27,851,000 

63,634,000 

2,945,631 

527,082,931 

2,314,490 

21,058,400 


"  Increase  in  value  of  all  principal  field  crops  for 

1905,  compared  with  1904 
"  Increase  in  value  of  all  principal  field  crops  for  1905, 

compared  with  1903 


Farm  Value 

$139,939,538 

37,946,100 

34,631,302 

25,096,835 

23,429,854 

1,206,118 

$262,249,747 

13,432,366 

7,241,798 

$282,923,911 
$29,588,143 
$44,901,921 


"  In  addition  to  the  value  of  the  annual  production  of  field 
crops  given  above,  it  is  safe  to  say  that  the  value  of  the  annual 
production  of  the  dairy  farms,  the  truck  farms,  the  market- 
able increase  in  cattle,  sheep,  hogs  and  horses,  will  bring  the 
farm  production  of  the  current  year  for  the  three  States  of 
Minnesota  and  North  and  South  Dakota  up  to  $340,000,- 
000,  or  about  one  hundred  million  dollars  more  than  the 
combined  value  of  the  entire  output  of  the  United  States  in 
gold,  silver,  copper  and  iron  ore." 

As  the  South  is  calling  upon  the  North  for  much  money  to 
aid  her  in  the  upbuilding  of  her  almost  countless  enterprises, 
it  is  germane  to  the  subject  to  reprint  the  following  statistics 
furnished  by  the  Manufacturers'  Record  of  Baltimore: 


FACTS  ABOUT  THE  SOUTH 


Capital  invested  in  cotton 

mills 
Spindles 

Cotton  bales  used 
Value  of  cotton  crop 
Pig  iron  made,  tons 


1880 


1890 


1905 


$21,000,000 
667,000 
225,000 
$313,696,000 
397,000 

$60,000,000 
1,712,000 
546,000 
$390,000,000 
2,600,000 

$225,000,000 
9,205,949 
2,163,000 
$680,000,000 
3,300,000 

1 1904  and  1894.        *  Sault  Ste.  Marie. 


XXX11 


MONEY   AND   INVESTMENTS 


6,000,000 
$39,000,000 

21,200,000 
$90,700,000 

67,000,000 
$250,000,000 

$257,000,000 
$457,000,000 
$261,000,000 
20,600 
$660,000,000 
$3,051,175,000 

$659,000,000 
$917,589,000 
$306,000,000 
42,900 
$773,000,000 
$4,510,925,000 

$1,500,000,000 
$1,750,000,000 
$555,480,000 
60,000 
$1,750,000,000 
$6,500,000,000 

Coal  mined,  tons 
Lumber  products,  value 
Capital  invested  in  manu- 
facturing 
Value  of  products 
Value  of  exports 
Railroads,  mileage 
Farm  products,  value 
Property  assessed 

Our  tremendous  immigration  is  an  example  of  prosperity. 
Commercially  and  financially  immigrants  should  prove  an 
advantage,  but  the  political  significance  of  such  a  vast  inflow  of 
good,  bad,  or  indifferent  population,  the  future  only  can  solve. 

No  better  indication  of  prosperity,  which  is  always  reflected 
by  activity  upon  the  great  stock  exchanges,  can  be  exampled 
than  this:  During  the  business  depression  of  1897  a  seat  on 
the  New  York  Stock  Exchange  sold  at  $18,000,  and  now 
(1906)  one  has  just  sold  at  $95,000;  a  large  sum  just  for  the 
privilege  of  doing  business  upon  an  exchange. 

There  is  no  doubt  of  our  exceeding  wealth,  developed  and 
undeveloped.  A  Japanese  of  broad  reputation,  predicts  a 
population  of  600,000,000  for  these  United  States  within  a 
time  so  little  distant  as  to  startle  one.  It  may  all  be  true, 
but  keep  all  your  financial  life-saving  apparatus  in  working 
order,  nevertheless. 

It  may  be  worth  remembering  that  in  times  of  acute  busi- 
ness depression,  the  railroads  of  the  West  and  South  have 
shown  a  far  greater  proportionate  shrinkage  in  earnings  than 
have  those  in  the  more  thickly  settled  portion  of  the  country. 

In  the  meantime  we  are  safe  for  the  moment,  for  the  great 
natural  causes  of  prosperity,  which  no  stock  manipulator  can 
control,  as  our  great  crops  with  good  prices,  are  silently  but 
surely  exercising  the  controlling  influence. 


The  following  is  but  a  partial  list  of  the  books,  periodicals, 
newspapers,  official  publications,  statutes,  etc.,  referred  to 
in  the  preparation  of  this  book.  A  vast  amount  of  research 
work  has  been  necessitated,  and  much  of  it  unproductive. 
It  is  deemed  advisable,  therefore,  to  only  list  such  authori- 
ties as  have  actually  been  helpful  to  the  author,  omitting 
those  from  which  no  benefit  has  been  derived.  Recognition, 
however,  is  due  to  the  vast  number  of  daily  papers  in  different 
sections  of  the  country,  which  have  been  read  seeking  for 
terms  and  expressions  as  in  local  use,  and  for  information  in 
relation  thereto.  A  list  of  the  prominent  and  leading  news- 
papers of  the  United  States  might  properly  be  included  in 
this  list,  but  are  omitted  from  lack  of  space. 

For  the  benefit  of  those  who  desire  to  follow  further  any  of 
the  subjects  briefly  covered  in  this  volume,  some  help  may  be 
derived  by  referring  to  the  letters  prefixed  to  certain  of  the 
following  authorities;  the  prefix  "a"  indicating  books  in 
relation  to  banks  and  banking;  "  b,"  to  railroads  and  railroad 
securities;  "  c,"  to  stocks  and  the  stock  market;  "  d,"  to 
foreign  exchange;  "  e,"  to  "options;"  and  "  /,"  to  general 
matters  of  interest  in  relation  to  money  and  finance. 

a      AMERICAN  FINANCE.    W.  R.  Lawson. 

b       AMERICAN  RAILWAY  TRANSPORTATION.    Emory  R.  Johnson. 

APPLETON'S  CYCLOPEDIA  OF  AMERICAN  BIOGRAPHY.     6  vols.    James 
Grant  Wilson  and  John  Fiske. 

BANK  RATE  AND  THE  MONEY  MARKET.    R.  H.  Inglis  Palgrave. 

BOARD  OF  TRADE  OF  CHICAGO.    47th  Annual  Report. 
b       BRITISH  RAILWAY  FINANCE.    Walter  W.  Wall, 
a       CLEARING-HOUSES.    James  G.  Cannon. 

COMMENTARIES.      Sir  William  Blackstone. 

CONSTITUTION  OF  THE  BOSTON  CLEARING-HOUSE  ASSOCIATION. 

CONSTITUTION  OF  THE  BOSTON  STOCK  EXCHANGE. 

CONSTITUTION  OF  THE  NEW  YORK  STOCK  EXCHANGE. 
b  f     CORPORATION  FINANCE.    Thomas  L.  Greene. 

CREDIT  AND  ITS  USES.    William  A.  Prendergast. 

ECONOMIC  METHOD  AND  ECONOMIC  FALLACIES.     William  Warrand 

Carlile. 

a  d    FOREIGN  EXCHANGE.    H.  K.  Brooks, 
a       FUNDS  AND  THEIR  USES.     Frederick  A.  Cleveland. 
a       GOVERNMENT  BONDS.    The  National  City  Bank  of  New  York  City. 

xxxiii 


xxxiv  MONEY   AND  INVESTMENTS 

HISTORY  OF  THE  CONQUEST  OF  MEXICO.      3     vols.      William    H. 

Prescott. 
HISTORY    OF    THE    CONQUEST    OF     PERU.    2    vols.     William   H. 

Prescott. 
HISTORY  OF  THE  UNITED   STATES   MINT  AND    COINAGE.      George 

G.  Evans. 

How  TO  INVEST  MONEY.    E.  R.  Gabbott. 
LAW    OF   BANKER   AND   CUSTOMER.      (London.)      James     Walter 

Smith. 

LIFE  OF  ALBERT  GALLATIN.    John  Austin  Stevens. 
LIFE  OF  ALEXANDER  HAMILTON.    Henry  Cabot  Lodge. 
LIFE  OF  ANDREW  JACKSON.    William  Graham  Sumner. 
LIFE  OF  DANIEL  WEBSTER.    Henry  Cabot  Lodge. 
LIFE  OF  THOMAS  JEFFERSON.    John  T.  Morse,  Jr. 
a  /     LOMBARD  STREET.     Walter  Bagehot. 

a       MEMORANDA  CONCERNING  UNITED  STATES  BONDS.    Fisk  &  Robinson. 
/        MONETARY  SYSTEMS  OF  THE  WORLD.     M.  L.  Muhleman. 
d  f     MONEY  AND  THE  MECHANISM  OF  EXCHANGE.     W.  Stanley  Jevons. 
b       MOODY'S  MANUAL  OF  RAILROAD  AND  CORPORATION  SECURITIES. 
a       NATIONAL  BANK  ORGANIZATION.    National  City  Bank  of  New  York 

City. 

/       ON  THE  PROBABLE  FALL  IN  THE  VALUE  OF  GOLD.      Michel    Che- 
valier. 

6       POOR'S  MANUAL  OF  RAILROADS. 

a  /     PRINCIPLES  AND  PRACTICE  OF  FINANCE.    Edward  Carroll,  Jr. 
RULES  AND  REGULATIONS  OF  THE  LONDON  STOCK  EXCHANGE. 
STEVENS'  COPPER  HANDBOOK. 

a       THE  A  B  C  OF  BANKS  AND  BANKING.    George  M.  Coffin. 
e       THE  A  B  C  OF  OPTIONS  AND  ARBITRAGE.     S.  A.  Nelson. 
c       THE  A  B  C  OF  STOCK  SPECULATION.     S.  A.  Nelson. 
c       THE  A  B  C  OF  WALL  STREET.    S.  A.  Nelson. 
/        THE  ACCOUNTANCY  OF  INVESTMENT.     Charles  Ezra  Sprague. 
/        THE  AMERICAN    LAW    RELATING    TO     INCOME    AND     PRINCIPAL. 

Edwin  A.  Howes,  Jr. 
6       THE  ANATOMY    OF   A    RAILROAD    REPORT    AND    TON-MILE    COST. 

Thomas  F.  Woodlock. 

c       THE  ART  OF  WALL  STREET  INVESTING.    John  Moody. 
c  f     THE  COUNTRY  BANKER'S  HANDBOOK.     (For  London  Transactions.) 

J.  George  Kiddy. 

/       THE  ESSENTIALS  OF  BUSINESS  LAW.     Francis  M.  Burdick. 
/        THE    FUNDAMENTAL  PROBLEM    IN    MONETARY    SCIENCE.      Correa 

Moylan  Walsh. 

/       THE  HISTORY  AND  PRINCIPLES  OF  BANKING.    James  William  Gilbart. 
THE  HISTORY  OF  ENGLAND.    6  vols.    T.  Smollett. 
THE  LAW  OF  BILLS,  CHEQUES,  NOTES  AND  I.  O.  U's.  (London.)  James 

Walter  Smith. 

6  c    THE  MANUAL  OF  STATISTICS  STOCK  EXCHANGE  HAND-BOOK, 
a  d    THE  MODERN  BANK.     Amos  Kidder  Fiske. 
THE  PEOPLE'S  MONEY.     W.  L.  Trenholm. 
a  f    THE  PRINCIPLES  OF  MONEY  AND  BANKING.     2   Vols.     Charles   A. 

Conant. 

e       THE  PUT-AND-CALL.     Leonard  R.  Higgins. 
c       THE  TICKER  BOOK  AND  MANUAL  OF  THE  TAPE.    S.  S.  Fontaine  and 

R.  L.  Neville. 
c  f     THE  WORK  OF  WALL  STREET.     Sereno  S.  Pratt. 

TREATISE  ON  THE  LAW  OF  STOCK-BROKERS  AND  STOCK  EXCHANGES. 

John  Randolph  Dos  Passes. 

/        TRUST  FINANCE.     Edward  Sherwood  Meade. 
/       TRUSTS,  POOLS  AND  CORPORATIONS.    William  Z.  Ripley. 
WEALTH  OF  NATIONS.    Adam  Smith. 


FOREWORD  xxxv 

OFFICIAL   PUBLICATIONS 

ANNUAL  REPORTS  OF  THE  SECRETARY  OF  THE  TREASURY. 

BONDS  ISSUED,  SINKING  FUNDS  AND  ASSESSMENTS  OF  METROPOLITAN 
DISTRICTS  AND  ARMORIES.  Massachusetts. 

BULLETIN  OF  THE  BUREAU  OF  LABOR  IN  RELATION  TO  BUILDING 
AND  LOAN  ASSOCIATIONS  OF  THE  UNITED  STATES.  Depart- 
ment of  Commerce  and  Labor. 

CLASSIFICATION  OF  OPERATING  EXPENSES.  Interstate  Commerce 
Commission. 

COMMISSION  ON  INTERNATIONAL  EXCHANGE,  REPORT  OF,  Document 
No.  144,  58th  Congress,  2nd  Session. 

CONGRESSIONAL  GLOBES. 

DAILY  CONSULAR  AND  TRADE  REPORTS.  Department  of  Commerce 
and  Labor. 

DOMESTIC  AND  FOREIGN  MAIL  MATTER.  United  States  Post-Office 
Department. 

INFORMATION  RESPECTING  UNITED  STATES  BONDS,  PAPER  CUR- 
RENCY, COIN,  PRODUCTION  OF  PRECIOUS  METALS,  ETC.  United 
States  Treasury  Department. 

INSURANCE  COMPANY  REPORTS  (FIRE  AND  LIFE)  OF  THE  VARIOUS 
STATES. 

LAWS  OF  THE  VARIOUS  STATES  AND  GREAT  BRITAIN  IN  RELATION 
TO  CERTIFIED  PUBLIC  ACCOUNTANTS. 

LAWS  OF  THE  VARIOUS  STATES  RELATING  TO  THE  ORGANIZATION  OF 
CORPORATIONS. 

NATIONAL-BANK  ACT  AS  AMENDED.     Comptroller  of  the  Currency. 

NEGOTIABLE  INSTRUMENTS  LAW.     Michigan. 

RAILROAD  REPORTS  OF  THE  VARIOUS  STATES. 

REGULATIONS  OF  THE  TREASURY  DEPARTMENT  IN  RELATION  TO 
UNITED  STATES  BONDS. 

REPORTS  OF  THE  COMPTROLLER  OF  THE  CURRENCY. 

REPORTS  OF  THE  DIRECTORS  OF  THE  MINT. 

REPORTS  OF  THE  GAS  AND  ELECTRIC  LIGHT  COMMISSIONERS  OF 
THE  VARIOUS  STATES. 

REPORTS  OF  THE  SAVINGS  BANK  COMMISSIONERS  OF  THE  VARIOUS 
STATES. 

STATISTICS  OF  RAILWAYS  OF  THE  UNITED  STATES.  Interstate  Com- 
merce Commission. 

STATUTES  OF  MASSACHUSETTS  (AND  OTHER  STATES)  RELATING 
TO  CO-OPERATIVE  BANKS. 

TELEPHONES  AND  TELEGRAPHS.  Bulletin  No.  17  of  the  Department 
of  Commerce  and  Labor. 

THE  BUSINESS  CORPORATION  LAW  OF  1903.     Massachusetts. 

VARIOUS  LAWS  IN  RELATION  TO  THE  ENGLISH  COINAGE  AND  MINT. 

PAMPHLETS 

A  HAND  BOOK  OF  THE  MASSACHUSETTS  COLLATERAL  LEGACY  AND 

SUCCESSION  TAX.     State  Street  Trust  Co.,  Boston. 
ARTICLES  OF  ASSOCIATION  AND  RULES  AND  REGULATIONS  OF  THE 

CHICAGO  CLEARING-HOUSE  ASSOCIATION. 
CLEARING  OUT-OF-TOWN  CHECKS  IN  ENGLAND  AND  UNITED  STATES. 

James  C.  Hallock. 

HISTORY  OF  THE  EARLY  SCHOOLS  IN  LONG  ISLAND.     J.  H.  Thiry. 
INFLUENCE  OF  THE  NEW  GOLD  SUPPLIES.    George  E.  Roberts. 
MEMORIAL  TO  THE   WEST  VIRGINIA   LEGISLATURE   REPRESENTING 

A  PLAN  OF  SETTLEMENT  FOR  THE  WEST  VIRGINIA  DEBT. 
TELEPHONE  DEVELOPMENT.     Vinton  A.  Sears. 
THE  CURRENCY  REPORT.     Special  Committee  of  the   Chamber  of 

Commerce  of  the  State  of  New  York. 
THE  STAMP  SAVINGS  SOCIETY  OF  BOSTON. 


xxxvi  MONEY   AND   INVESTMENTS 

MAGAZINES   AND   FINANCIAL   PAPERS 

ATLANTIC  MONTHLY.     Boston,  Mass. 

BULLETIN  OF  THE  AMERICAN  INSTITUTE  OF  BANK  CLERKS.     New 

York  City. 

DAILY  BOND  BUYER.     New  York  City. 
JOURNAL  OF  THE  INSTITUTE  OF  BANKERS.     London. 
LONDON  ECONOMIST. 

MANUFACTURERS'  RECORD.     Baltimore,  Md. 
NEW  YORK  JOURNAL  OF  COMMERCE. 
STREET  RAILWAY  JOURNAL.     Chicago. 
THE  AMERICAN  BANKER.     New  York  City. 
THE  BANKER'S  MAGAZINE.     New  York  City. 
THE  COMMERCIAL  AND  FINANCIAL  CHRONICLE.     New  York  City. 
THE  INTER-NATION.     Boston. 
THE  MONEY  MARKET  REVIEW.     London. 
THE  NORTH  AMERICAN  REVIEW.    New  York  City. 
THE  OUTLOOK.     New  York  City. 

THE  QUARTERLY  JOURNAL  OF  ECONOMICS.     Harvard  University. 
THE  STATIST.     London. 

THE  WALL  STREET  JOURNAL.     New  York  City. 
THE  WORLD'S  WORK.     New  York  City. 
UNITED  STATES  INVESTOR.    Boston,  Mass. 


OCT  2  4  1907 


MONEY  AND  INVESTMENTS 


A.  The  "  ticker  "  abbreviation  for  "  assented,"  or  "  Class 
A." 

A  and  0.  Interest  or  dividends  payable  Bend-annually, 
April  and  October. 

A.  i.    Highest  grade;  none  better. 

"  A  "  Bond  (or  "  A  "  Stock).  Used  when  securities  are 
divided  into  classes,  such  as  "  A  bond,"  "  B  bond."  (See 
"  Preferred  Stock.") 

Abrasion.  The  reduction  in  weight  of  coins  or  bullion 
resulting  from  friction. 

Absolute  Indorsement.  This  binds  the  indorser  of  an  in- 
strument to  pay  the  same  only  in  case  of  failure  on  the  part 
of  all  prior  indorsers  so  to  do,  and  upon  due  notice  to  him 
of  their  failure. 

Absorbed.  There  are  two  common  uses  of  this  word: 
First,  "  the  market  absorbed  all  stock  offered."  By  this  it 
is  understood  that  all  the  stock  that  was  offered  found  a 
market,  or  purchasers.  Second,  we  say  that  one  railroad  has 
"  absorbed  "  another,  meaning  that  it  has  obtained  control 
of,  or  bought  it. 

Abstract  of  Title.     See  "  Mortgage." 

Acceptance.  When  a  "  time  draft  "  is  received  for  collec- 
tion, although  not  due,  it  is  presented  to  the  person  against 
whom  it  is  drawn  for  "  acceptance."  This  is  done  by  his 
writing  across  its  face  the  word  "  Accepted,"  followed  by 
his  signature,  and  it  is  then  said  to  have  been  "  honored." 
It  has  now  become  an  evidence  of  indebtedness  against  him; 
very  much  the  same  thing  as  a  promissory  note.  The  person 
drawing  the  draft  has,  in  like  manner,  assumed  the  position 
of  an  indorser,  so  that  if  it  is  negotiated  in  the  meantime,  or 
the  "  drawer  "  has  been  given  use  of  the  money  by  his  bank 
which  has  assumed  the  collecting  of  the  draft,  he  must  make 
it  good  if  the  "  acceptor  "  fails  to  pay  it. 


2  MONEY  AND  INVESTMENTS 

It  is  customary  to  date  a  draft  when  it  is  "  accepted,"  and 
to  name  a  place  of  payment;  otherwise  it  is  payable  at  the 
"  acceptor's  "  place  of  business. 

"  Formerly  in  England  the  drawee  of  a  bill  could  accept  it 
orally,  and  such  is  still  the  rule  in  some  of  our  States.  But 
by  the  usage  of  merchants,  as  well  as  by  modern  statutes  in 
England  and  in  many  of  our  States,  an  acceptance  must  be 
in  writing  on  the  bill.  This  is  a  proper  requirement,  for  it 
enables  any  one  who  receives  the  bill  to  tell  at  once  whether 
it  has  been  accepted." 1 

A  "  qualified  acceptance  "  should  not  be  allowed  by  the 
party  presenting  a  draft  to  be  accepted.  If  the  person  against 
whom  the  draft  is  drawn,  in  addition  to  writing  the  word 
"  accepted,"  adds  thereto  some  qualification,  such  as  making 
it  conditional  upon  the  receipt  of  merchandise  against  the 
shipment  for  which  it  was  drawn,  a  "  qualified  acceptance  " 
results.  The  reason  for  not  permitting  this  is  that  the 
"  drawer  "  or  indorser  upon  a  paper  is  entitled  to  his  rights 
as  set  forth  in  its  original  form,  and  any  change  as  above, 
except  with  their  knowledge  and  approval,  relieves  them  from 
any  liability  upon  the  paper. 

(See  also  "  Time  Draft.") 

Acceptor.      See  "  Draft." 

Accident  Insurance.  A  form  of  insurance  by  which  the 
person  taking  out  the  policy  may  recover  from  the  company 
in  case  of  accident  to  himself,  the  form  of  payment  by  the 
company  being  either  so  much  per  week  —  according  to  the 
amount  of  the  policy  —  during  the  time  of  disability  resulting 
from  the  accident;  or  a  given  sum  in  event  of  death  as  the 
result  of  an  accident;  or  lesser  stated  sums  if  the  loss  of  a 
limb  or  loss  of  sight,  or  a  lesser  permanent  injury  is  sustained. 
Any  one  of  the  latter  payments  would  be  in  addition  to  the 
weekly  payments  on  account  of  inability.  These  last,  how- 
ever, are  generally  limited  to  a  duration  of  a  fixed  number 
of  weeks. 

Many  people  who  are  traveling  a  great  deal  or  who  are 
engaged  in  a  more  or  less  hazardous  form  of  occupation,  carry 
such  policies  continually;  others  take  them  out  for  special 
occasions,  as  before  a  railroad  trip  or  an  ocean  voyage,  to 
cover  the  period  of  the  journey.  The  cost  is  not  excessive 
and  this  form  of  insurance  has  come  into  very  general  and 
satisfactory  use.  A  person  taking  out  such  a  policy  should, 
however,  read  it  with  great  care,  and  follow  accurately  the 
instructions  given  therein  in  case  of  accident,  and  also  post 
himself  upon  the  conditions  under  which  the  company  be- 
comes liable,  as  there  are  numerous  "  ifs  "  to  these  policies. 

This  is  a  very  old  form  of  insurance,  having  been  known  for 
1  Francis  M.  Burdick, 


MONEY   AND  INVESTMENTS  3 

several  centuries,  but  the  Travelers  Insurance  Company  of 
Hartford  was  the  first  to  bring  it  into  successful  use  in  America, 
in  1863.  At  this  present  time  many  companies  are  writing 
this  sort  of  risk,  the  amount  outstanding  running  into  the 
billions  of  dollars. 

Accommodation.  "  Borrowers  succeeded  in  finding  ac- 
commodation," meaning  that  they  succeeded  in  borrowing 
money.  To  be  "  accommodated  "  in  finance  means  the  same 
as  in  its  general  sense,  to  accomplish  what  is  desired. 

Accommodation  Indorser.     See  "  Accommodation  Paper." 

Accommodation  Note.     See  "  Accommodation  Paper." 

Accommodation  Paper.  Instruments  which  the  maker, 
drawer,  acceptor,  or  indorser  signs  merely  as  an  accommoda- 
dation  to  another,  reaping  no  financial  benefit  for  so  doing,  — 
unless  paid  a  commission  for  the  act,  as  is  sometimes  the 
case.  In  other  words,  a  person  becomes  a  party  to  an  in- 
strument without  consideration,  and  for  the  purpose  of 
loaning  his  credit  to  another.  The  rights  of  all  parties  con- 
cerned in  "  accommodation  paper  "  are  somewhat  complex, 
and  should  be  thoroughly  understood.  For  example:  cor- 
porations cannot  legally  make  "  accommodation  paper." 
Also:  the  signer  for  accommodation  is  under  no  liability  to 
the  person  benefited  or  accommodated,  as  no  consideration 
was  given;  but  he  is  liable  to  any  other  holder  for  value, 
of  the  paper. 

The  lending  of  one's  credit  in  the  shape  of  "  accommoda- 
tion paper  "  is  a  very  bad  practice  and  should  be  seldom,  if 
ever,  indulged  in.  Financial  ruin  has  resulted  in  many 
instances  from  this  sort  of  thing. 

Account.     See  "  For  the  Account." 

Account  and  Risk.  A  transaction  in  which  the  broker  acts 
merely  as  "  agent  "  for  the  account  of  the  customer,  who 
assumes  all  the  risk  incurred. 

Accountant.     See  "  Auditor." 

Account  Current.    Same  as  "  Current  Account." 

Account  Day.  Strictly,  the  last  of  the  "  fortnightly  settling- 
days."  Also  called  "  pay-day  "  and  "  settlement  day."  This 
is  the  day  upon  which  stocks  are  delivered  and  paid  for,  and 
settlements  made. 

Account  Days.    See  "  Fortnightly  Settling-Days  " 

Account  Sales.  The  statement  which  a  broker,  agent,  or 
commission  merchant  gives  his  customer,  showing  how  his 
account  stands. 

Accounts  Payableo  Open  accounts  with  others  showing 
sums  due  them,  but  not  evidenced  by  forms  of  indebtedness 
such  as  notes  or  acceptances. 


4  MONEY    AND    INVESTMENTS 

Accounts  Receivable.  Open  accounts  on  the  books  of  a 
firm,  corporation,  etc.,  against  its  customers,  not  evidenced 
by  written  obligations  such  as  notes  or  acceptances. 

Accrued  Dividend.  This  has  the  same  relation  to  a  stock 
as  "  accrued  interest  "  has  to  bond.  Not  many  stocks  are 
sold  with  "  accrued  dividend "  or  "  with  dividend,"  and 
then  only  in  case  of  "  guaranteed  stocks  "  or  stocks  where  the 
dividend  is  certain  and  fixed. 

Accrued  Interest.  One  of  the  most  common  expressions  in 
connection  with  investment  dealings,  and  one  very  fre- 
quently not  clearly  understood.  Let  us  take,  for  example, 
a  $1,000  bond  bearing  4%  interest,  or,  in  other  words,  paying 
the  holder  $40  yearly.  The  interest  is  payable  January  1st 
and  July  1st,  each  year;  $20  at  each  time.  This  interest  will 
not  be  paid  before  it  is  due;  that  is,  in  the  month  of  June 
the  interest  due  July  1st  cannot  be  collected;  but,  suppose 
Maria  Jones  had  held  the  bond  in  her  possession  until  the 
1st  of  June,  she  would,  therefore,  be  entitled  to  the  interest 
upon  her  money  at  the  rate  of  4%  annually  from  January  1st 
last,  at  which  time  she  received  the  interest  then  due.  There- 
fore, if  Maria  Jones  wishes  to  sell  this  bond  to  Henry  Drake 
at  a  price,  say,  of  par  and  "  accrued  interest,"  she  would  re- 
ceive from  him  $1,000  —  the  principal  sum  of  the  bond — 
and  also  the  interest  upon  the  $1,000  from  January  1st  to 
June  1st,  or  five  months,  at  the  rate  of  4%  per  annum.  Drake 
would,  therefore,  have  paid  to  Maria  Jones  five  months' 
interest,  which  he  could  not  collect  until  the  1st  of  July,  at 
which  time  he  would  collect  not  only  the  five  months'  inter- 
est paid  Maria  Jones,  but  the  additional  one  month's  interest, 
for  the  time  which  he  had  had  his  money  invested;  there- 
fore, the  amount  of  money  paid  to  Maria  Jones  would  not  be 
lost  by  Drake,  but  would  come  back  to  him,  together  with 
his  one  month's  interest,  on  July  1st. 

This  is  the  only  method  by  which  it  is  possible  to  sell  any 
security  upon  other  than  interest  dates,  without  loss  of 
interest  to  the  holder,  except  an  additional  price  be  placed 
directly  upon  the  security  at  the  time  of  its  sale,  equal  to  the 
interest  which  has  "  accrued  "  since  the  last  interest  pay- 
ment. Most  stocks  are  sold  in  this  latter  way,  and,  in  fact, 
all  securities  dealt  in  upon  the  New  York  Stock  Exchange. 
Bonds  upon  the  Boston  Stock  Exchange  are  sold  with  "  ac- 
crued interest,"  except  "  defaulted  "  and  "  income  bonds," 
which  are  sold  without  interest  —  or  "  flat,"  as  it  is  called.  There 
is,  therefore,  generally  a  difference  in  quotations  of  bonds 
upon  the  two  exchanges,  from  the  fact  of  being  sold  "  flat  " 
upon  the  New  York,  and  "  with  interest  "  upon  the  Boston 
Exchange.  "  With  interest,"  "  and  interest,"  or  "  interest 
added"  are  expressions,  either  of  which  is  used  in  the  same 


MONEY    AND    INVESTMENTS  5 

sense  as  "  accrued  interest."  If  a  note  is  drawn  payable 
"  with  interest  "  and  no  rate  is  mentioned,  the  legal  rate  of 
interest  prevailing  in  the  State  where  the  note  is  made  payable 
is  understood. 

Accumulated  Dividends.  The  dividends  which  have  accrued 
but  not  been  paid  on  "  cumulative  "  (which  see)  stock. 

Accumulative.    See  "  Cumulative." 

Acknowledgment.  A  certificate  of  the  proper  officer  that 
the  maker  of  a  written  instrument  has  appeared  before  him 
and  declared  it  to  be  his  wilful  act  and  deed. 

Acquittance.  A  written  agreement  relieving  one  from  the 
necessity  of  making  a  payment  of  money. 

Active  Account.  Bank  deposits  against  which  many 
checks  are  drawn,  and  at  frequent  intervals;  accounts  with 
brokers  which  show  many  transactions. 

Active  Partner.  One  actively  engaged  in  the  business,  and 
who  incurs  full  liability,  as  distinguished  from  "  silent  part- 
ner "  and  "  special  partner." 

Active  Stocks  or  Bonds.  Securities  which  are  frequently 
bought  and  sold;  quoted  daily,  or  nearly  so,  in  the  news- 
papers or  reports  of  the  various  stock  exchange  transactions. 
When  trading  in  a  security  ceases  for  any  considerable  time, 
it  becomes  "  inactive." 

Actual  Rates.    See  "  Posted  Rates." 

Actual  Reserve.    The  same  as  "  Reserve  Held." 

Actuary.  A  person  skilled  in  the  theories  and  mathemat- 
ical calculations  on  which  life  insurance  is  founded  and  con- 
ducted. He  computes  mathematically  the  reserve  upon 
policies,  premiums,  surplus,  dividends,  and  performs  any 
other  mathematical  calculations  needed  in  the  practice  of 
the  company.  The  study  of  death  rates  always  has  been, 
and  must  continue  to  be,  a  very  important  item  in  the 
activity  of  the  "  actuary,"  and  the  measuring  of  probabil- 
ities based  on  his  calculations  is  one  of  his  most  responsible 
duties. 

Adjustment  Mortgage  Bonds.  There  are  very  few  of  these 
in  existence,  the  most  notable  example  being  that  of  the 
Atchison,  Topeka  &  Santa  Fe  Railway  Co.,  which,  in  the 
reorganization  of  1895,  scaled  down  its  original  first  mort- 
gage to  75%,  for  which  new  first  mortgage  bonds  were  issued, 
and  the  difference,  namely,  25%  of  the  principal,  and  the 
defaulted  interest,  adjusted  by  issuing  other  bonds.  These 
were  accumulative  "  income  bonds  "  for  the  first  five  years 
and  then  became  a  fixed  obligation.  These  are  known  as 
"  adjustment  mortgage  bonds." 

Administrator  (or  Administratrix).    A  person  named  by  the 


6  MONEY    AND    INVESTMENTS 

Probate  Court,  or  other  proper  authority,  to  take  charge  of 
the  goods  and  estate  of  one  dying  without  a  will. 

Admitted  to  Quotation.  This  expression  is  frequently  seen 
in  financial  news  relating  to  this  or  that  security,  and  by  it 
is  meant  that  the  security  in  question  is  allowed  to  be  dealt 
in  upon  the  Unlisted  Department  of  the  Stock  Exchange. 
To  clearly  understand  this,  however,  the  reader  should  turn 
to  the  two  subjects  "  Listed  "  and  "  Unlisted  Securities." 
If  a  security  is  admitted  into  the  "  listed "  department, 
that  is,  placed  upon  the  regular  list  by  the  Governing  Com- 
mittee, the  term  "  listed  "  would  be  used  instead  of  "  ad- 
mitted to  quotation." 

Advance.  "  The  market  has  advanced;  "  "  prices  have 
advanced;  "  expressions  indicating  a  rise  in  prices. 

An  occasional  use  of  the  word  is  to  indicate  that  money 
has  been  loaned,1  or  that  a  payment  has  been  made.  When 
Jones  "  advances  "  Smith  $50,  it  may  indicate  either  of  these 
transactions. 

Advance  Bill.  This  is  a  regular  "  commercial  bill  "  of  ex- 
change, only  drawn  against  goods  to  be  afterwards  shipped 
instead  of  against  a  shipment  already  made.  They  are 
usually  drawn  only  when  there  is  a  considerable  regularity 
of  trading  between  the  drawer  and  the  acceptor  of  the  bill, 
whereby  the  latter  leaves  it  largely  to  the  judgment  of  the 
drawer  as  to  the  character,  amount,  and  date  of  shipment 
of  the  goods. 

Adventure.  The  Adventure  Consolidated  Copper  Co.  Also 
an  old  term  for  a  shipping  venture  or  speculation. 

Advice.  If,  as  an  example,  you  forward  a  check  to  some 
bank  for  deposit  accompanied  with  a  letter  containing  the 
words  "  for  the  credit  and  advice  of  James  Taylor,"  it  means 
that  the  bank  must  credit  the  amount  to  James  Taylor 
and  notify  him;  i.e.  send  him  "  advice,"  that  it  has  done  so. 
Also  "  letter  of  advice,"  to  which  refer. 

Afloat.  A  term  used  by  traders  in  grain  indicating  the 
amount  loaded  in  vessels  which  may  be  in  harbour,  or  ex- 
ported, but  not  yet  reached  its  destination. 

After  Sight.  After  presentation  for  "  acceptance,"  to 
which  refer. 

Agent.  One  who  represents,  acts  for,  or  in  behalf  of,  an- 
other, who  is  called  his  "  principal." 

In  brief,  they  are  divided  into  two  classes  —  "  special  "  and 
"  general."  The  latter  is  "  one  who  is  appointed  to  do  acts 
of  a  class,  and  a  special  agent  .  .  .  appointed  to  do  indi- 

1  In  the  remarks  by  the  Governor  of  the  Bank  of  England  following 
the  Panic  of  1866,  loans  made  to  assist  the  business  community  in  tiding 
over  the  strained  condition  of  affairs  were  referred  to  as  "  advances." 


MONEY    AND    INVESTMENTS  7 

vidual  acts."  *  An  illustration  would  be  that  a  "  general 
agent  "  might  be  employed  to  buy  pig  iron,  no  restriction 
being  placed  upon  him  as  to  where  or  of  whom  he  should  buy. 
He  would  become  a  "  special  agent  "  if  his  principal  had 
restricted  him  to  the  purchase  of  a  certain  lot  of  iron  and  his 
authority  ended  with  the  success  or  failure  to  purchase  the 
especially  described  article. 

The  relationship  between  agents,  their  principals  and  third 
parties,  and  the  rights  and  liabilities  of  the  same,  are  matters 
worthy  of  serious  consideration,  and  should  be  thoroughly 
understood  before  one  becomes  involved  as  any  of  the  above 
parties.  (The  reader  wishing  to  pursue  this  subject  further 
is  referred  to  the  subject  of  "  Agency  "  very  clearly  set 
forth  in  "  Essentials  of  Business  Law,"  by  Francis  M.  Bur- 
dick.) 

One  very  important  point,  however,  it  may  be  well  to 
mention  here,  namely:  the  signing  by  an  agent  of  any  nego- 
tiable instrument  or  contract  under  seal.  It  is  a  safe  rule  for 
him  to  pursue  to  sign  the  name  of  his  principal,  by  himself 
as  agent;  as,  for  instance,  "  James  Jackson,  by  Thomas 
Jones,  Agent;  "  not  "  Thomas  Jones,  Agent,  for  James  Jack- 
son." This  is  to  avoid  personal  liability  on  the  part  of  the 
agent. 

Agent  de  Change.2    The  French  term  for  a  stock  broker. 

Agio.  (There  are  various  other  ways  of  spelling  this  word.) 
The  rate  of  exchange  between  the  moneys  of  two  countries; 
also  the  percentage  of  difference  in  values  between  two  differ- 
ent moneys  in  the  same  country.  For  instance,  a  paper  cur- 
rency in  some  country  may  not  be  accepted  at  its  face  value 
in  exchange  for  metallic  currency.  The  percentage  by  which 
the  latter  exceeds  the  former  in  value  is  known  as  "  agio." 
The  percentage  in  value  at  which  the  paper  currency  is  ac- 
cepted below  the  metallic  currency  is  called  "  disagio; " 
"  agio  "  representing  a  premium  upon  a  better  currency,  and 
"  disagio  "  a  discount  upon  a  depreciated  currency.  The 
wear  and  tear,  or  "  abrasion  "  of  a  metallic  currency  is  also 
called  "  disagio." 

Agiotage.  This  is  a  foreign  term  having  commonly  two 
meanings:  First,  the  rate  or  price  of  "  exchange;  "  second, 
speculation  in  stocks,  bullion,  exchange,  etc. 

1  Defined  by  the  Supreme  Court  of  the  United  States. 

2  "  The  French  stock  market  has  since  (1795)  remained  under  official 
supervision,  although  alongside  of  the  seventy  official  agents  de  change, 
occupying    the  parquet,  has  arisen  the  unofficial  board  known   as  the 
coulisse.     Several  legal  conflicts  have  occurred  between  the  privileged 
brokers  and  the  coulisse,  which  led  in  1898  to  the  reorganization  of  the 
stock  exchange  and  the  prohibition  of  dealings  on  the  coulisse,  except  in 
certain  classes  of  securities." — The  Principles  of  Money   and  Banking, 
Charles  A.  Conant. 


8  MONEY    AND    INVESTMENTS 

Agricultural  Chemical.  American  Agricultural  Chemical 
Co.  (Chemical  fertilizers  and  by-products.) 

Aj.    The  "  ticker  "  abbreviation  for  "  adjustment." 

A.  J.  O.  J.  April,  July,  October,  and  January;  interest  or 
dividends  payable  quarterly,  beginning  with  April. 

Albany.  Boston  &  Albany  R.  R.  Co.,  leased  to  New  York 
Central  &  Hudson  River  R.  R.  Co. 

Allonge.  When  checks,  promissory  notes,  or  similar  nego- 
tiable instruments  have  their  backs  entirely  covered  with 
indorsements,  a  slip  of  paper,  called  an  "  allonge,"  is  often 
attached  to  receive  any  further  indorsements. 

All  or  Any  Part.  The  next  subject  explains  this  in  part,  to 
which  it  is  the  opposite,  as  the  condition  is  that  any  amount, 
or  even  all,  of  the  issue  may  be  sold  to  the  successful  bidder. 

All  or  None.  This  can  best  be  understood  by  first  reading 
"  Sealed  Bid."  "  All  or  none  "  is  a  condition  imposed  by 
the  bidder  for  an  issue  of  securities,  by  which  it  is  understood 
that  in  the  event  of  his  bid  being  accepted,  he  is  to  take  the 
entire  issue,  but  no  lesser  amount.  Or  the  seller  of  the  se- 
curity may  stipulate  that  the  successful  bidder  shall  be 
bound  by  this  same  condition. 

Allotment  Note.  Signed  by  a  seaman,  giving  authority  for 
the  payment  of  a  portion  of  his  wages  from  time  to  time  to 
some  other  person. 

Allouez.    Allouez  Mining  Co.    (Copper.) 

Amal.    Amalgamated. 

Amalgamated.    Amalgamated  Copper  Co. 

American  Pneumatic.  American  Pneumatic  Service  Co. 
(Pneumatic  tube  service.) 

American  Rails.  The  general  foreign  —  particularly  Lon- 
don —  name  for  United  States  railway  shares.  As  a  rule, 
however,  railway  shares  which  are  traded  in  upon  the  New 
York  Stock  Exchange  are  those  referred  to. 

Americans.    The  general  foreign  —  particularly  London  — 
name   for   United   States   securities.      As   a   rule,    however, 
securities  that  are  dealt  in  upon  the  New  York  Stock  Ex- 
change are  more  especially  understood. 

American  Telephone  and  Telegraph  Co.  See  "  Telephone 
Securities." 

Amortise  (or  Amortize).  The  payment  of  a  debt  by  means 
of  a  sinking  fund.  (See  "  Sinking  Fund.") 

Anaconda.    Anaconda  Copper  Mining  Co. 

Ancillary  Receiver.  A  second,  or  assistant  receiver,  who 
manages  the  property  situated  in  some  State  other  than  that 
in  which  the  "  receiver  "  (principal  one)  gets  his  authority. 


MONEY    AND    INVESTMENTS  9 

And  Interest.    See  "  Accrued  Interest." 

A.  N.  F.  M.  August,  November,  February,  and  May; 
interest  or  dividends  are  payable  quarterly  beginning  with 
August. 

Anna.    See  India  Money  Table  under  "  Rupee." 

Annual  Interest.  Interest  payable  once  a  year.  Very  few 
investments  have  interest  payable  at  such  infrequent  inter- 
vals, and  are  not  considered  as  desirable  as  in  the  cases  where 
interest  is  payable  semi-annually  or  quarterly. 

Annuity.  A  fixed  sum  of  money  payable  yearly;  or,  to  put 
it  differently:  a  fixed  sum  —  granted  or  bequeathed  —  pay- 
able at  certain  regular  periods. 

Anthracite  Roads.    See  "  Hard  Coalers." 

Anticipation  of  Taxes.    See  "  Tax  Relief  Bonds." 

Anti-Stock  Watering  Laws.  Laws  which  require  that 
there  shall  be  a  dollar  invested  for  every  dollar  of  stock 
issued. 

Apd.  The  "  ticker  "  abbreviation  for  "  assessment  paid." 
(See  "  Assented  Stocks.") 

Appraised  Value.  The  value  set  upon  a  property  by  an 
"  appraiser." 

Appraisement.  The  placing  of  a  value  upon  a  property ; 
the  value  set. 

Appraiser.  One  who  is  named  by  an  individual  or  ap- 
pointed by  law  to  estimate  values. 

Arbitrage.  Buying  a  security  in  one  market  and  selling  it 
in  another  at  a  better  price;  taking  advantage  of  a  difference 
in  current  quotations  upon  the  same  security  in  two  different 
markets,  by  buying  in  one  and  selling  in  the  other,  at  a 
higher  price;  the  difference,  less  certain  expenses,  represent- 
ing the  "  arbitrageur's  "  profit.  Sometimes  the  sale  is  made 
in  one  market  before  the  purchase  in  the  other.  "  Arbitrage  " 
business  is  carried  on  very  extensively  between  London  and 
New  York,  but  chiefly  by  what  is  known  as  "  international 
banking  houses,"  to  a  much  lesser  degree  between  different 
American  markets.  Some  "  arbitrage  "  transactions,  how- 
ever, are  conducted  between  the  New  York  Stock  Exchange 
and  the  "  New  York  Consolidated  Stock  and  Petroleum 
Exchange." 

"  Rights  "  for  the  privilege  of  subscribing  to  a  new  stock 
issue  may  be  handled  as  an  "  arbitrage  "  dealing  in  this 
way:  Suppose  "  rights "  in  a  certain  corporation  can  be 
purchased  at  4^.  An  "  arbitrage  "  dealer  buys  100  of  these 
for  $450.  These  give  him  the  privilege  of  subscribing  to  100 
shares,  we  will  say,  of  new  stock  in  the  company.  Imme- 
diately upon  making  the  purchase,  he  sells  100  shares  of  the 


10  MONEY    AND    INVESTMENTS 

old  stock  of  the  company  at  105  per  share,  borrowing  the 
stock  temporarily  to  make  delivery  until  the  new  stock  shall 
be  issued  in  accordance  with  his  "  rights."  By  this  trans- 
action he  makes  fifty  cents  per  share,  for  his  "  rights  "  cost 
him  but  $4.50  each,  carrying  the  privilege  of  subscribing  to 
the  new  stock  at  $100  per  share.  The  new  stock  would  cost 
him  but  104^,  whereas  he  has  sold  the  old  stock  at  105. 

Also,  in  case  of  merging  of  one  company  into  another, 
where  the  stock  of  one  company  may  be  exchanged  for  stock 
in  the  other,  opportunities  for  "  arbitrage "  dealing  often 
arise. 

In  the  business  known  as  "  foreign  exchange  "  (see  "  Tri- 
angular Operation  ")  the  triangular  plan  of  using  a  credit 
at  one  place  to  settle  a  debit  at  another,  is  a  transaction 
known  as  "  arbitrage."  (See  "  Back  Spread.") 

Arbitrage  Houses.  Stock  exchange  houses  which  make  a 
specialty  of  dealing  in  "  arbitrage."  (See  that  subject.) 

Arbitrageur.     A  dealer  in  "  arbitrage."  (See  that  subject.) 

Arbitrary.  A  fixed  sum  paid  by  a  main  line  of  railway  to  a 
branch,  or  connecting  line,  for  freight  originating  on  the 
latter,  regardless  of  what  is  its  proportion  of  the  through  rate 
on  such  freight.  This  is  on  the  theory  that  a  branch  road, 
delivering  freight  to  a  main  line,  is  entitled  to  more  than  its 
mileage  proportion  of  the  through  rate. 

Arbitrated  Exchange  (or  Arbitration  of  Exchange).  Refer 
to  "  Triangular  Operation,"  which  is  what  is  understood  by 
this  subject. 

Arcadian.    Arcadian  Copper  Co. 

Argentines.  The  various  securities  of  the  Argentine  Re- 
public dealt  in  on  the  London  Stock  Exchange. 

Arnold.    Arnold  Mining  Co.    (Copper.) 

Article.  This  is  the  English  term  for  our  "  item,"  to  which 
the  reader  may  refer. 

Ash  Bed.    Ash  Bed  Mining  Co.    (Copper.) 

Asked  Price.  The  price  at  which  a  security  or  commodity 
is  offered  for  sale.  The  "  asked  price  "  of  Western  Union 
Telegraph  stock  is  95  when  that  is  the  price  at  which  it  can 
be  bought. 

Assaying.    A  chemical  analysis  of  ores  or  metals. 

Assay  Office.  A  branch  of  the  U.  S.  Mint  next  to  the  Sub- 
Treasury  on  Wall  St.,  in  New  York  City.  Its  functions  are  to 
assay,  part,  and  refine  gold  or  silver  when  presented  in  the 
form  of  crude  bullion,  jewelry,  or  whatever  it  may  be,  and  the 
manufacture  of  gold  and  silver  bars.  All  such  that  pass 
through  the  "  assay  office  "  bears  the  Government  stamp 
certifying  to  weight  and  fineness.  A  charge  is  made  for  doing 


MONEY    AND    INVESTMENTS  11 

the  work  for  others  than  the  Government.  There  are  "  assay 
offices  "  at  other  points  in  the  country. 

Assay  Office  Bar.  A  United  States  Government  bar  of  fine 
gold  or  silver  manufactured  at  a  government  "  assay  office," 
and  so  termed  to  designate  it  from  one  made  without  govern- 
ment regulation,  which  is  called  a  "  commercial  bar." 

Assented  Stocks  (or  Bonds).  In  the  event  of  a  corporation 
passing  through  a  reorganization  where  the  security  holders 
are  requested  to  give  "  assent  "  to  a  certain  plan;  in  the  case 
of  a  stock  being  "  assessed;  "  or  similar  instances  where  the 
consent  of  each  share  or  bondholder  is  desired,  some  banking 
house  or  trust  company  is  usually  selected  to  receive  the 
securities  and  stamp  thereon  in  each  case  the  fact  that  the 
holder  has  "  assented  "  to  the  plan  or  paid  the  "  assessment." 
If  more  than  one  "  assessment  "  is  called  for,  "  first  assess- 
ment paid,"  "  second  assessment  paid,"  etc.,  as  the  case  may 
be,  will  be  stamped  on  the  security.  Securities  so  stamped 
may  have  quite  a  different  market  value  from  those  not 
stamped,  for  it  is  evidence  of  the  assent  or  non-assent  to  the 
plan. 

Financial  columns  and  stock  exchange  sheets  refer  to  the 
above  in  the  brief  method  of  "  assented,"  "  ass't.  pd.,"  "  1st 
ass't.  pd.,"  etc. 

Assessable.     See  "  Non-assessable." 

Assessed  Valuation.  When  a  banker  offers  for  sale  a  bond 
of  any  municipality,  the  "  assessed  valuation  "  is  one  of  the 
important  facts  set  forth.  There  is  a  general  rule  that  the 
total  debt  of  a  municipality  shall  not  be  greater  than  a  certain 
percentage  of  the  "  assessed  valuation  "  after  taking  into 
consideration  any  sinking  fund  or  debt  for  water  works  — 
which  are  supoosed  to  be  self-sustaining.  The  "  assessed 
valuation  "  is  the  value  fixed  upon  the  property  of  the  mu- 
nicipality by  authorized  officials  for  the  purpose  of  taxation, 
but  the  rules  for  fixing  the  assessment  vary  in  the  different 
States.  In  Massachusetts,  for  instance,  it  is  customary  to 
assess  property  somewhere  near  its  marketable,  or  real,  value, 
whereas,  in  many  of  the  Western  States  the  assessment  is  based 
upon  about  a  third  of  the  marketable  value,  or,  even,  in  some 
cases,  a  lesser  percentage;  therefore,  it  is  necessary  to  have 
some  knowledge  as  to  the  percentage  which  the  "  assessed 
valuation  "  in  a  given  State  bears  to  the  marketable  value  of 
the  property  in  satisfying  oneself  as  to  whether  or  not  the 
indebtedness  of  a  municipality  is  too  excessive  for  the  valua- 
tion given. 

The  "  real  valuation  "  is  very  frequently  given  in  banker's 
circulars,  offering  municipal  bonds,  for  the  purpose  of  en- 
abling an  investor  to  reach  the  conclusion  above  mentioned. 
This  "  real  valuation,"  however,  is  largely  guess  work,  but 


12  MONEY    AND    INVESTMENTS 

long  familiarity  with  such  matters  has  enabled  the  bankers  to 
approximate  such  figures  with  a  reasonable  degree  of  cer- 
tainty. 

Assessment.  See  "  Non-assessable  "  and  "  Double  Lia- 
bility." 

Assessment  and  Fraternal  Insurance.  A  system  of  life 
insurance  by  which  the  annual  premium  to  be  paid  by  the 
insured  is  not  fixed,  but  subject  to  change  from  time  to  time, 
according  to  the  deaths  during  the  period,  each  member  being 
assessed  for  his  proportion  of  the  expense  of  the  Society  and 
the  death  losses. 

This  is  probably,  as  a  class,  the  cheapest  kind  of  insurance, 
but  has  proved  to  be  the  most  uncertain,  on  account  of  the 
many  associations  which  have  failed,  and  the  —  at  times  — 
high  assessments  levied.  It  is  taken  out  largely  by  those 
of  limited  means  and  in  small  amounts.  It  is  commonly 
maintained  by  Granges  and  secret  orders  in  general,  and  is  a 
very  old  form  of  insurance,  its  most  successful  exponent 
being  the  "  Guilds  "  of  the  older  countries. 

Assets.  Everything  of  any  supposed  value  belonging  to  a 
person,  business,  or  corporation,  are  called  "assets;"  such 
as  property,  real  estate,  machinery,  merchandise,  material 
and  stock  in  process  of  manufacture,  cash  and  debts  re- 
ceivable, patent  rights,  trade  marks,  good  will,  profits, 
etc. 

Assets  Currency.  A  currency  which  it  has  been  suggested 
that  national  banks  issue  but  has  not  yet  been  attempted. 
It  has  received  much  attention  and  certain  recommendations 
from  the  Committee  on  Currency  and  Banking  of  the  House 
of  Representatives.  It  was  proposed  to  issue  bank  notes, 
secured  —  with  certain  limitations  —  by  the  general  assets 
of  the  issuing  bank,  instead  of  Government  Bonds. 

Assign.  To  transfer  in  writing  any  right  or  interest.  A 
.merchant  is  commonly  said  "  to  assign  "  when,  being  unable 
to  pay  his  debts,  he  transfers  his  property  to  another  for 
distribution  among  his  creditors. 

Assignat.  During  the  French  Revolution  of  1789,  mone- 
tary difficulties  were  experienced  in  France,  resulting  in  an 
issue  of  paper  currency  known  as  "  assignats,"  the  security 
behind  it  being  church  land  that  had  been  confiscated, 
besides  which  they  were  additionally  secured  by  all  the 
national  domains  and  other  property.  The  issue  became  so 
great,  over  45,000,000,000  of  francs,  that  there  was  a  great 
decline  in  their  value  before  their  withdrawal.1  Conant  says 
that  their  depreciation  was  due  to  "  the  attempt  to  base  cir- 

1  The  People's  Money,  by  W.  L.  Trenholra,  and  Century  Dictionary  and 
Cyclopedia. 


MONEY    AND    INVESTMENTS  13 

culating  notes  upon  land  and  other  wealth  of  unquestioned 
value,  but  not  of  immediate  exchangeability." 

Assignee.  One  to  whom  some  right  or  interest  is  transferred 
by  writing.  An  "  assignee  for  the  benefit  of  creditors  "  is 
one  to  whom  an  insolvent  merchant  voluntarily  transfers 
his  property  for  conversion  into  cash  and  distribution  among 
his  creditors.  An  "  assignee  in  insolvency  "  is  a  person 
appointed  by  a  State  court  under  the  State  insolvency  law 
to  take  possession  of  the  property  of  an  insolvent  debtor, 
convert  it  into  cash,  and  distribute  it  among  the  cred- 
itors. 

Assign  in  Blank.  A  written  transfer  (see  "  Assign  ")  in 
which  there  is  no  name  inserted  of  any  party  to  whom  transfer 
is  made,  but  which  may  be  done  at  any  time. 

Associated  Banks.  Members  of  the  "  Clearing-House  As- 
sociation." 

Ass't.     Assessment. 

Assumed  Bonds.  Bonds  issued  by  a  corporation,  the  con- 
trol or  ownership  of  which  passes  into  the  hands  of  another 
corporation,  which  latter  agrees  to  be  responsible  for  the 
payment  both  of  the  principal  and  interest  of  such  bonds, 
are  spoken  of  as  "assumed  bonds;"  that  is,  the  "parent 
company  "  assumes  the  indebtedness.  In  railroad  finance 
such  securities  are  spoken  of  as  "  divisional  issues,"  which  is 
really  what  they  are.  Again,  they  are  frequently  referred 
to  as  "  guaranteed  bonds,"  but  in  the  latter  case  the  fact  of 
the  guarantee  appears  upon  the  bonds  themselves. 

Unless  a  payment  of  an  issue  of  an  absorbed  company  has 
been  actually  assumed  by  the  "  parent  company,"  the  in- 
vestor can  only  look  to  the  value  of  the  property  actually 
mortgaged  as  security  for  its  investment,  although  the  prin- 
cipal and  interest  on  such  issues  might  be  protected  by  the 
larger  company  for  the  protection  of  its  own  credit.  Where 
the  bonds  have  been  actually  assumed,  then  the  "  parent 
company  "  may  be  looked  to  for  the  final  payment,  although 
even  in  such  a  case  it  is  not  advisable  to  purchase  securities  of 
a  branch  or  division  which  is  not  of  sufficient  importance  to 
the  controlling  company  to  make  it  worth  while  to  maintain 
the  same  and  keep  it  in  good  physical  condition. 

"  A  "  Stock  (or  Shares).    See  "  Preferred  Stock." 

Atch.    Atchison,   Topeka  &  Santa  Fe  Railway  Company. 

Atchison  (or  Atch).  Atchison,  Topeka  &  Santa  Fe  Railway 
Co. 

Atlantic.    Atlantic  Mining  Co.     (Copper.) 

Atlantic  Coast.  Atlantic  Coast  R.  R.  Co.,  controlled  by  the 
Atlantic  Coast  Line  Co. 


14  MONEY    AND   INVESTMENTS 

Atlantic  Ports.  As  usually  understood,  Boston,  New  York, 
Philadelphia,  and  Baltimore. 

At  Sight.     Payable  on  presentation. 

At  the  Market.  An  order  to  buy  or  sell  at  the  best  price 
the  market  affords  at  the  time,  no  actual  price  limit  being 
named. 

At  the  Opening.  An  order  to  buy  or  sell  at  the  best  market 
price  obtainable  immediately  after  the  opening  of  the  ex- 
change, no  actual  price  limit  being  set. 

At  Three  Days.  Delivery  of  the  security  upon  the  third  day 
following  the  contract. 

Attorney  in  Fact.  One  who  acts  under  the  authority  con- 
ferred by  power  of  attorney. 

Attorney's  Opinion.  The  necessary  procedure  by  a  corpo- 
ration issuing  bonds  is  very  complex,  and  the  work,  after  it  is 
accomplished,  is  generally  reviewed  by  some  competent  law- 
yer, and  approved  by  him,  before  such  an  issue  of  bonds  is 
accepted  by  a  banking  house.  His  written  statement  or 
approval  is  called  an  "  attorney's  opinion,"  or  "  legal  opin- 
ion." 

In  the  case  of  a  municipality  issuing  bonds,  the  'steps 
which  it  must  take  also  necessitate  great  care,  and  it  is  like- 
wise customary  to  have  some  competent  attorney  approve 
the  issue.  In  fact,  all  banking  houses  of  repute  condition  a 
purchase  of  bonds  upon  the  same  being  approved  by  their 
attorney,  and  in  making  a  contract  for  purchase  this 
phrase  is  usually  inserted:  "  The  necessary  papers  evidencing 
the  legality  of  the  issue  satisfactorily  to  our  attorney  to  be 
furnished  us,  prior  to  our  taking  up  and  paying  for  the  bonds." 

An  investor  in  bonds  should  assure  himself  that  the  banking 
house  offering  the  same  has  a  proper  "  attorney's  opinion  " 
covering  the  issue,  unless  it  is  some  well  known  established 
issue  which  has  been  upon  the  market  for  years,  and  which 
is  the  obligation  of  such  a  stable  and  established  corporation 
or  municipality  that  he  has  the  right  to  assume  that  all  such 
steps  have  been  properly  taken.  One  would  hardly  ask  for  a 
"  legal  opinion  "  covering  an  issue  of  City  of  Boston  bonds, 
which  has  been  outstanding  for  some  years. 

The  opinion  of  a  lawyer,  no  matter  how  clearly  setting 
forth  the  correctness  of  the  legal  status  of  an  issue,  does  not 
for  a  moment  imply  that  such  an  issue  is  a  sound  investment, 
for,  as  Moody  puts  it  in  his  excellent  book:  "  The  Art  of  Wall 
Street  Investing,"  he  "  has  never  yet  known  a  security  so 
poor  that  a  lawyer's  opinion  could  not  be  had  to  back  it." 

When  an  "  attorney's  opinion  "  is  produced  there  are  one 
or  two  precautions  which  should  be  taken.  In  the  first  place, 
the  bond  issue  covered  by  the  opinion  should  be  thoroughly 


MONEY    AND    INVESTMENTS  15 

described,  so  that  there  may  be  no  way  of  mistaking  its 
identity;  again,  the  attorney  should  state  clearly  that  he 
has  not  only  examined  all  the  papers  necessary  to  establish 
the  legality  of  the  issue,  but,  furthermore,  that  he  has  exam- 
ined one  of  the  executed  bonds  and  approved  the  same. 
There  have  been  cases  known  where  all  the  steps  leading  up 
to  the  issue  of  bonds  had  been  approved  by  some  attorney, 
but  when  the  bonds  themselves  were  finally  issued,  they  did 
not  agree  with  the  conditions  set  out  in  the  papers  furnished. 
Such  a  bond  would  probably  not  be  a  legal  or  binding  obli- 
gation, or  at  least  it  might  give  an  opportunity  to  escape 
payment,  if  the  inclination  to  do  so  existed. 

Au  Besoin.  Literally,  "  in  case  of  need."  This  often  ap- 
pears in  bills  of  exchange  naming  so'me  one  to  whom  applica- 
tion for  payment  may  be  made  in  case  the  original  person 
(drawee)  refuses. 

Auction  Sales.  Quotations  of  securities  sold  at  auction 
frequently  appear  in  the  papers.  In  Boston  the  custom  is  to 
hold  auction  sales  of  securities  twice  a  week  —  except  during 
the  summer  months,  and  then  once  a  week  —  upon  fixed  days, 
the  securities  having  been  previously  advertised  in  the  daily 
papers.  These  sales  have  no  connection  whatsoever  with 
the  stock  exchanges;  are  held  in  the  auction  sales  rooms  of 
certain  private  banking  firms,  at  which  time  any  person  may 
be  present.  Many  securities  not  listed  upon  the  stock  ex- 
changes are  sold  in  this  way,  as  well  as  securities  which  the 
law  provides  must  be  sold  at  auction.  There  is  no  restriction 
as  to  securities  which  may  be  offered  for  sale  through  such  a 
medium. 

Auditor.  One  who  makes  a  profession  of  examining  and 
reporting  upon  the  financial  condition  of  a  firm,  corporation, 
municipality,  etc.;  a  person  competent  to  examine  accounts; 
compare  the  charges  with  the  vouchers;  to  establish  the  fact 
that  the  financial  condition  is,  or  is  not,  as  represented.  A 
railroad  "  Auditor "  is  the  official  who  examines  the  ac- 
counts of  the  different  ticket  offices,  departments,  etc.,  to 
ascertain  that  no  errors  or  dishonest  acts  have  occurred. 
The  Auditor  of  Public  Accounts  is  he  who  examines  into  the 
accounts  of  all  the  departments  of  a  State,  for  instance,  and 
soon. 

It  is  generally  customary  for  investment  bankers  to  employ 
an  "  auditor,"  or  expert  accountant,  to  examine  in  detail 
the  books  of  a  corporation  which  is  already  in  existence  and 
running,  to  verify  the  earnings  as  rendered  by  such  corpora- 
tion, and  whose  bonds,  stocks,  or  other  obligations  it  is  the 
banker's  intention  to  purchase.  Of  course,  in  the  case  of 
many  corporations,  like  large  established  railroads,  who  are 


16  MONEY    AND    INVESTMENTS 

obliged  to  furnish,  at  stated  intervals,  a  public  statement  of 
their  earnings,  sworn  to  by  the  road's  own  officials,  it  is  very 
often  not  customary  to  have  their  accounts  verified  in  this 
way,  but  in  the  case  of  street  railways,  electric  light  com- 
panies, gas  companies,  etc.,  and  even  in  the  case  of  the  smaller 
railroads,  the  custom  is  generally  followed. 

The  necessity  for  such  examination  is  well  set  forth  in  the 
following  true  case:  Several  existing  properties  had  been 
consolidated  and  operated  as  a  single  property  for  about  one 
year;  a  statement  of  the  earnings  of  the  property  since  con- 
solidation had  been  furnished  to  the  bankers  intending  to 
purchase  the  bonds.  The  earnings  seemed  very  satisfactory, 
but  an  expert  accountant,  in  making  a  very  exhaustive  and 
careful  investigation  of  the  books,  found  that  at  the  time  of 
consolidation,  each  of  the  various  properties  had  on  hand 
quite  an  amount  of  supplies,  such  as  coal,  oil,  etc.,  and  that 
during  the  period  since  consolidation,  these  supplies  had 
been  consumed  without  any  charge  for  the  value  having 
been  made  against  the  earnings.  If  these  supplies,  which 
were  necessary  supplies,  had  been  purchased  during  the 
period  of  operation,  the  net  earnings  as  rendered  would  have 
been  very  much  lessened.  The  result  was,  that  the  earnings 
were  found  insufficient  to  warrant  the  banker's  taking  the 
bonds.  This  is  not  an  unusual  case,  and  any  "  auditor  " 
should  have  readily  discovered  the  discrepancy.  It  does 
not  argue  in  any  way  a  desire  to  deceive  upon  the  part  of  the 
officials  of  the  corporation.  They  were  very  likely  uncon- 
sciously deceiving  themselves,  and  were  as  much  surprised 
as  any  one  to  find  that  they  had  misrepresented  the  true 
state  of  affairs. 

Now,  be  it  said,  in  support  of  the  honourable  banking 
fraternity,  that  this  banking  firm  having  contracted  for  the 
purchase  of  this  issue  of  bonds,  based  upon  everything  being 
as  represented,  had  in  turn  sold  it  to  a  large  institution,  which 
had  sent  its  own  expert  to  examine  the  property,  and  who 
had  made  a  careful  and  favourable  report.  The  issue  of  bonds 
was  of  some  considerable  size  and  represented  an  attractive 
profit  to  the  bankers.  Upon  finding  the  discrepancy  in  the 
earnings,  the  matter  was  at  once  reported  to  the  institution, 
the  bankers  declining  to  have  the  issue  pass  through  their 
office,  necessitating  not  only  the  loss  of  anticipated  profits, 
but  an  actual  financial  loss  resulting  from  employment  of 
experts,  etc.,  running  into  quite  a  sum. 

This  specific  example  has  been  set  forth  here  to  show  some 
of  the  troubles  and  tribulations  of  the  banking  houses,  of 
which  the  investment  public  may  know  but  little.  It  is 
perhaps  a  safe  statement  to  make  that  on  the  average,  one 
out  of  three  issues  of  corporation  bonds  investigated,  and 


MONEY    AND    INVESTMENTS  17 

generally  at  some  considerable  time  and  expense,  are  de- 
clined by  bankers  after  examination.  The  direct  money 
expense,  and  the  loss  of  time  to  the  banking  houses  from  this 
source/  is  considerable  in  the  long  run,  and  an  investor  must 
understand  that  it  is  done  primarily  to  protect  the  investors' 
interests,  and,  next,  to  maintain  the  good  reputation  of  the 
banker. 

There  are,  of  course,  some  exceptions  to  this  rule;  banking 
houses  have  been  known  to  buy  issues  of  bonds  without 
proper  investigation  or  the  employment  of  sufficiently  expert 
examiners,  but  the  bankers  in  general  must  not  be  condemned 
on  account  of  the  faults  of  the  few.  This  fact  is  emphasized 
because  of  the  unfair  charge  often  made  of  the  desire  of  the 
average  banker  to  sell  anything  that  will  sell  and  so  make  a 
profit.  The  investment  public  little  knows  the  care  which  is 
generally  taken  to  safeguard  its  interests,  and  even  in  spite  of 
all  this  care,  some  unforeseen  condition,  like  possibly  un- 
expected competition,  or  the  invention  of  some  new  method 
of  accomplishing  what  the  corporation  in  existence  may  al- 
ready be  doing,  will  bring  disaster,  and,  in  such  cases,  the  in- 
vestor is  too  prone  to  heap  all  the  blame  upon  the  banker. 
And  let  me  say  a  word  here  to  the  investor,  before  he  puts  the 
blame  of  financial  loss  upon  the  person  from  whom  he  makes 
the  purchase.  Let  him  make  a  thorough  investigation  of 
what  has  brought  about  the  loss,  let  him  ascertain  the  care 
that  was  taken  at  the  time  of  purchase  to  safeguard  his 
interests,  and  then  let  him  be  willing  to  take  his  own  share 
of  the  responsibility,  and  remember  that  there  is  no  invest- 
ment of  any  kind  that  can  be  made  without  some  risk,  and 
the  greater  the  interest  obtained,  as  a  rule,  the  greater  the 
risk.  Remember  that  risk  increases  tremendously  with  the 
growth  of  the  size  of  the  promised  interest  return.  When 
an  investment  turns  out  favourably,  and,  as  in  some  cases,  a 
profit  from  the  increase  in  value  of  the  security  additional  to 
the  interest  return  is  derived,  the  investor  is  inclined  to  pat 
himself  upon  the  back  with  great  satisfaction  and  give  him- 
self all  the  credit  for  this  profit;  whereas,  it  may  have  been 
due  entirely  to  the  advice  of  the  banker.  The  banker  usually 
gets  no  credit ;  but,  if  a  loss  results  you  may  rest  assured  that 
the  banker  will  get  all  the  odium  of  the  blame. 

The  writer  desires  to  lay  considerable  stress  upon  the  im- 
portance of  the  wording  of  an  "  auditor's  certificate."  There 
are  certificates  and  certificates,  and  although  a  banker  may 
state  that  a  certain  issue  of  bonds  has  been  safeguarded  by 
a  careful  examination  into  and  report  upon  the  earnings  of 
the  corporation  yet  that  fact  in  itself  is  not  sufficient.  Knowl- 
edge should  be  had  somewhat  as  set  forth  by  the  following, 
which  appeared  in  the  Wall  Street  Journal: 


18  MONEY    AND    INVESTMENTS 

"  The  public  .  .  .  has  suffered  enough  disappointment 
from  accounts  certified  by  reputable  auditors  to  make  the 
whole  question  of  the  public  accountant  and  his  function  a 
matter  of  direct  interest  to  the  investor.  It  is  very  hard  for 
the  outsider  to  discriminate  between  what  is  really  a  trust- 
worthy certificate  and  what  is  a  bad  one.  There  is  no  standard 
form. 

Here  is  a  typically  bad  certificate  : 

"  '  We  certify  that  the  above  condensed  balance  sheet  is  correct, 
according  to  the  books  and  accounts. 

" '  (Signed) 

"  '  Accountants. 

"  Such  a  certificate  has  little  value.  If  the  affairs  of  the 
company  have  been  administered  against  the  stockholders' 
interests  and  for  the  benefit  of  a  dishonest  executive  it  is 
certain  that  the  books  submitted  to  examination  will  balance. 
The  certificate  professes  to  give  independent  protection  to 
stockholders,  but  it  could  be  used  by  the  crudest  swindler 
that  ever  deluded  the  unwary  investor. 

11  There  are  plenty  of  good  certificates.  Here  is  one  in 
abridged  form  which  amply  protects  the  stockholder: 

" '  We  have  examined  the  account  books  and  vouchers  of 
this  Company  and  its  associated  companies  and  have  verified 
the  consolidated  profit  and  loss  account  and  balance  sheet 
published  herewith.  We  find  the  inventories  sound  and  con- 
servative. The  depreciation  and  reserves  are  such  as  to  leave 
no  doubt  in  our  minds  that  the  final  balance  asset  values  are  safe. 
Every  care  has  been  taken  to  include  in  the  balance  sheet  all 
ascertainable  liabilities  of  the  company.' 

"  What  should  an  examination  be?  It  should  be  such  an 
investigation  as  the  stockholder  would  make  for  himself  if 
he  were  an  expert  accountant.  The  great  societies  of  account- 
ants in  Europe  demand  a  certain  standard  of  their  members, 
and  will  not  tolerate  certificates  given  where  no  real  audit  has 
been  made.  Every  one  is  willing  to  believe  that  this  is  the 
aim  and  ideal  of  our  Society  of  Public  Accountants.  They 
can  do  more  in  a  month  than  ill-informed  State  legislatures  can 
in  a  year.  They  can  establish  a  standard  form  of  analysis 
for  their  members  of  such  a  character  that  no  respectable 
corporation  will  care  to  use  the  certificates  of  accountants 
not  responsible  to  a  powerful  and  high-principled  organiza- 
tion such  as  theirs." 

Authorized  Issue.  The  total  amount  of  stocks,  bonds,  or 
whatever  the  security  may  be,  which  a  company  may  legally 
sell  in  accordance  with  the  terms  imposed  by  its  charter,  by- 
laws, or  otherwise. 


MONEY    AND    INVESTMENTS  19 

Authorized  Stock,  Bonds,  etc.  The  amount  of  each  which  a 
company  may  lawfully  issue. 

Available  Assets.  Property  which  can  be  had  for  sale  or 
use,  and  which  is  not  already  given  as  security  for  an  indebt- 
edness. 

Average  Life  of  Securities  Maturing  at  Different  Intervals. 
The  reader  will  find,  toward  the  end  of  the  subject  "  Net 
Return  upon  the  Investment,"  an  explanation  of  how  to 
compute  the  average  life  of  securities  maturing  at  different 
intervals. 

Averaging  Down.  Buying  more  stock  at  a  lesser  price  than 
the  last  or  previous  purchases,  in  order  to  reduce  the  average 
cost  to  the  holder. 

Averaging  Up.  Buying  more  of  a  given  security  as  prices 
advance.  By  this  process  the  average  cost  of  the  whole  in- 
creases. If  one  has  been  "  selling  short  "  (see  that  subject) 
a  certain  security,  and,  contrary  to  his  expectations,  the 
price  continues  to  advance,  he  may  make  additional  sales 
of  the  same  security  at  the  higher  quotations.  This  would 
also  be  known  as  "  averaging  up  "  or  "  averaging." 

Award.  In  relation  to  investments,  acceptance  of  a  propo- 
sition to  buy;  generally  used  in  reference  to  some  issue  of 
bonds,  for  the  purchase  of  which  bids  have  previously  been 
submitted.  (See  "  Sealed  Bid.") 

A.  &  F.  August  and  February;  interest  or  dividends 
payable  semi-annually  beginning  with  August. 

A.  &  0.     Interest  or  dividends  payable    semi-annually, 
April  and  October. 

B 

B.  This  is  the  "  ticker  "  abbreviation  for  "  Bonds,"  "  Class 
B,"  or,  accompanied  by  figures,  "  Bid,"  or  "  Buyer." 

Back.  For  "  backwardation."  (Explained  under  "  Con- 
tango.") 

Back  Spread.  This  is  a  term  used  in  connection  with 
"  arbitrage  "  dealings,  which  subject  it  is  first  necessary  to 
understand.  In  dealings  of  this  kind  between  New  York  and 
London,  for  instance,  there  is  a  difference  in  quotations 
between  the  two  markets  to  make  one  equivalent  to  the  other, 
as  the  cost  of  shipment,  rate  of  exchange,  loss  of  interest,  etc., 
has  to  be  taken  into  consideration.  For  the  sake  of  illustra- 
tion, we  will  call  a  stock  selling  in  London  at  102.50  the 
equivalent  price  to  a  stock  selling  in  New  York  at  par.  Or- 
dinary "  arbitrage  "  dealings  are  based,  therefore,  upon  the 
London  price  being  in  excess  of  102.50,  so  that  there  may  be 


20  MONEY    AND   INVESTMENTS 

a  profit  made  by  purchasing  in  one  market  and  selling  in  the 
other.  Should,  however,  this  difference  in  price  be  less  than 
the  normal;  that  is,  should  the  London  quotation  be  less  than 
102.50  when  the  New  York  quotation  is  at  100,  the  profit 
would  be  made  by  buying  in  London  and  selling  in  New  York. 
Transactions  of  that  kind  are  known  as  "  back  spreads." 

Backwardation.     See  "  Contango." 

Bad  Delivery.  A  security  not  fulfilling  the  conditions  im- 
posed by  the  stock  exchanges  as  referred  to  under  "  Good 
Delivery." 

Balance.  The  amount  due  from  one  party  to  another  after 
adjusting  accounts.  It  is  the  difference  between  the  charge 
and  credit  sides  of  an  account.  The  word  "  balances  "  is  often 
used  to  indicate  "  clearing-house  balances,"  to  which  subject 
refer.  (Also  see  "  New  York  Balances.") 

Balance  between  Banks.    See  "  Clearing-House  Rates." 

Balance  of  Trade.  The  "  balance  of  trade  "  is  in  favour 
of  the  United  States  as  against  Germany,  for  example,  when 
we  have  sold  the  merchants  of  Germany  merchandise  greater 
in  value  than  they  have  sold  us.  This  will  naturally  result  in 
the  shipment  of  gold  to  adjust  the  balance,  or  the  selling  in 
the  United  States  of  "  exchange  "  on  Germany  at  a  discount, 
if  the  condition  is  a  temporary  one.  The  "  balance  of  trade  " 
does  not  always  determine  the  debtor  country,  as  there  are 
other  factors  to  be  considered,  such  as  interest  and  principal 
due  on  account  of  securities  of  one  country  held  in  the  other. 
(See  "  International  Movement  of  Gold.") 

Balance  Sheet.  A  statement  showing  the  assets  and  lia- 
bilities, as  well  as  the  profits  and  losses,  of  a  business  or  cor- 
poration; a  statement  showing  the  true  financial  condition. 
To  put  it  in  more  exact  language:  the  assets  show  one  side 
of  the  account,  the  liabilities  and  capital  invested  —  i.e. 
proprietorship  —  the  other.  The  two  sides  should  balance, 
i.e.  equal  each  other. 

Balboa.  Monetary  unit  of  Panama,  and  the  equivalent  of 
our  American  dollar. 

Ballooning.  To  manipulate  prices  up  beyond  legitimate 
values,  to  unsafe  limits;  in  excess  of  intrinsic  worth. 

Baltic  Ports.  Ports  of  the  Baltic  Sea  from  which  most  of 
the  Russian  wheat  was  formerly  shipped.  This  is  now  to  a 
great  extent  accomplished  through  the  Black  Sea  ports. 

Bank.1    A  corporation  which  undertakes  the  care  of  money 

1  The  most  ancient  bank  is  supposed  to  have  been  established  in  Venice 
in  1157.  (See  "  The  History  and  Principles  of  Banking  "  by  James  William 
Gilbart.)  Other  writers  give  this  date  as  late  as  1171. 

"  The  first  banks  were  hardly  more  than  agencies  for  concentrating  and 
managing  the  loans  of  the  governments,  and  as  such  had  their  origin  in 


MONEY    AND    INVESTMENTS  21 

for  other  corporations,  firms,  or  individuals,  called  its  "  de- 
positors," this  money  always  being  subject  to  the  written 
order  of  those  making  the  deposit,  either  to  be  repaid  to  them 
or  to  others  as  appears  in  the  orders,  called  "  drafts," 
"  checks,"  etc.  Interest  may  or  may  not  be  allowed  the 
depositor  for  the  use  of  the  money,  according  to  the  nature 
of  the  bank,  and  the  agreement  made  with  each  depositing 
party.  Banks  must  make  use  of  money  entrusted  to  their 
care  so  as,  in  turn,  to  make  it  earn  enough  to  not  only  defray 
their  own  expenses,  but  to  pay  the  depositors  such  rates  of 
interest  as  may  be  agreed  upon.  To  do  this,  banks  are 
authorized  to  reloan  this  money;  to  collect  drafts,  notes,  and 
other  claims  for  which  they  may  make  charges.  Banks  are 
of  several  kinds,  each  having  its  own  peculiar  function, 
according  to  the  National  or  State  laws  under  which  it  acts. 
(See  "  National  Bank,"  "  Savings  Bank,"  "  Bank  of  Deposit," 
"  State  Bank,"  and  "  Trust  Company.") 

Bank  Account.  For  the  benefit  of  those  who  have  had  no 
experience,  and  who  desire  to  open  a  bank  or  trust  company 
account  against  which  to  draw  checks,  a  few  suggestions  are 
here  given: 

Select  your  bank;  find  out  the  minimum  sum  of  money 
which  it  will  receive  on  deposit.  If  you  have  it,  well  and  good. 
Then  secure  an  introduction  to  some  one  of  the  bank's  officers. 
State  to  him  —  or  the  one  to  whom  he  may  turn  you  over  — 
how  much  you  will  probably  keep  on  deposit,  and  whether 
you  will  wish  to  borrow  from  the  bank  from  time  to  time,  and 
the  nature  of  the  loans.  Large  banks  do  not,  as  a  rule,  desire 
small  accounts.  Everything  being  satisfactorily  arranged  so 
far,  you  will  next  hand  your  deposit  in  to  the  "  receiving 
teller,"  accompanied  by  a  "  deposit  slip  "  or  "  ticket " 
(furnished  by  the  bank)  with  the  blanks  filled  out,  giving  the 
character,  amount,  date,  etc.,  of  the  deposit,  together  with 
your  name  at  the  top.  He  will  return  you  a  "  pass-book  " 
with  the  sum  deposited  entered  on  the  debit  side.  Ascertain 
if  this  is  correct  before  leaving  the  counter.  This  book  should 
be  sent  in  to  the  bank  the  first  of  every  month  to  be  balanced, 
and,  when  returned  to  you  with  the  cancelled  checks,  it  is 
important  that  you  check  it  up  yourself  to  see  if  the  total 
amount  of  the  checks  paid,  plus  the  balance  reported  by  the 

Italy  as  early  as  the  twelfth  century.  The  word  '  bank  '  originally  signi- 
fied a  '  pile  '  or  '  mass  '  of  funds,  like  the  Italian  '  monte  '  and  the  French 
'  mont,'  and  was  applied  to  the  massing  together  of  various  government 
obligations,  or  their  consolidation  in  sets  of  negotiable  securities,  which 
were  issued,  transferred,  and  paid  through  '  bankers/  who  sometimes 
collected  the  public  revenues  and  made  payments  in  connection  with  the 
handling  of  public  debts.  It  was  for  such  functions  as  these  that  the  first 
banks  were  established  at  Venice,  Florence,  and  Genoa."  —  "  The  Modern 
Bank,"  by  A.  K.  Fiske. 


22  MONEY    AND    INVESTMENTS 

bank  to  your  credit,  added  to  the  sum  of  the  checks  drawn 
and  not  yet  presented  to  the  bank  for  payment,  equal  the 
sum  of  your  deposits.1  (Read  "  Bank-Book  "  and  "  Check.") 
Save  your  cancelled  checks. 

Before  leaving  the  bank  you  will  sign  in  a  book  (or  on  a 
signature  card)  kept  for  the  purpose,  so  that  your  checks 
may  be  identified  when  presented,  and  will  be  handed  a 
check-book  usually  furnished  at  the  bank's  expense.  Where 
the  latter  has  a  numbering  machine  it  is  well  to  let  it  first 
number  the  checks  and  stubs. 

Do  not  open  a  bank  account  in  your  own  name  as  agent, 
trustee,  or  attorney,  unless  you  are  acting  in  that  capacity 
for  some  other  person  or  persons, and  the  relationship 
is  clearly  evidenced  by  some  formal  instrument  to  that 
effect. 

Some  of  the  large  trust  companies  will  furnish,  upon  re- 
quest, a  pamphlet  going  into  all  matters  of  necessary  infor- 
mation in  reference  to  opening  and  conducting  an  account. 

Bank  Balance.  As  commonly  used  denotes  the  amount 
to  one's  credit  in  a  banking  institution,  but  has  been  extended 
to  mean  a  bank's  debit  or  credit  at  "  clearing."  (See  "  Clear- 
ing-House  Balance.") 

Bank  Bill.  See  "  National  Bank  Notes  "  and  "  Bankers' 
Bills." 

Bank-Book  (or  Pass-Book).  The  book  in  which  a  bank 
makes  a  written  entry  of  each  sum  of  money  deposited  by 
the  customer,  and  is  that  person's  evidence  of  the  bank's  in- 
debtedness to  him.  In  the  case  of  a  national  bank,  trust 
company,  or  any  "  bank  of  deposit,"  the  book  should  be 
presented  to  the  institution  once  a  month  to  have  it  balanced. 
In  the  case  of  a  savings  bank,  once  or  twice  a  year,  according 
to  the  custom  of  the  particular  bank.  The  depositor  must 
not  make  any  changes  or  additions  to  the  book,  as  all  such 
must  be  made  by  the  bank. 

The  bank  used  formerly  to  enter  onthe  credit,2  or  right 
hand,  page  of  the  book,  a  list  of  all  checks  paid  during  the 
month,  but  the  custom  more  generally  prevails  now  of  re- 
turning a  list  of  the  checks  on  a  separate  sheet  of  paper, 
the  total  amount  of  which  is  entered  upon  the  credit  page.1 

1  Banks  are  now  beginning  to  adopt  the  plan  of  returning  the  cancelled 
checks  the  first  of  each  month,  in  envelopes  with  a  printed  form  upon  the 
face,  on  which  appears  the  statement  of  the  account  as  formerly  entered 
upon  the  "  pass-book."     This  obviates  the  necessity  of  the  customer's 
handing  in  his  "  pass-book  "  from  time  to  time,  and  with  this  statement 
he  may  check  up  his  account. 

2  Remember  that  the  book  shows  the  bank's  account  with  the  depositor, 
not  his  account  with  the  bank,  so  that  what  he  deposits  is  a  "debit  "  of 
the  bank. 


MONEY    AND    INVESTMENTS  23 

On  the  left-hand,  or  debit  page,  has  been  entered  the  de- 
posits as  made  from  time  to  time.  These  (for  the  sake  of 
simplicity  we  will  assume  that  we  are  discussing  the  period 
covering  the  first  month's  business  with  the  bank)  are  added 
up;  the  total  amount  of  the  checks  paid  deducted  from  it, 
and  the  remainder,  or  balance,  entered  upon  the  credit  page, 
showing  the  amount  of  money  to  the  credit  of  the  depositor 
at  the  time. 

The  sum  of  the  checks  paid  and  the  amount  still  to  the 
credit  of  the  depositor  should  equal  the  sum  total  of  deposits. 
This  balance  to  the  depositor's  credit  is  carried  forward  on  to 
the  left-hand  page  and  is  added  in  with  the  next  month's 
deposits. 

Immediately  upon  the  bank's  returning  the  depositor  his 
"  pass-book,"  the  slip  of  paper  containing  the  list  of  checks 
paid  and  the  cancelled  checks  themselves,  he  must  satisfy 
himself  that  the  bank  has  made  no  mistake,  and,  therefore,  he 
proceeds  in  this  way: 

The  checks  paid  during  the  period  are  checked  off  with  the 
"  stubs,"  a  comparison  of  numbers  facilitating  this  process; 
those  which  have  been  drawn  by  the  depositor  but  not  pre- 
sented to  the  bank  may  thus  readily  be  ascertained,  and 
their  sum  total  is  added  to  the  total  amount  of  the  checks 
paid,  as  given  by  the  bank.  These  are  added  to  the  balance 
still  to  the  credit  of  the  depositor,  which  all  together  should 
exactly  equal  the  sum  of  the  deposits  for  the  period;  allow- 
ance being  made,  of  course,  for  interest  on  the  account,  or 
collection  charges.  These  will  be  entered  in  the  "  pass- 
book "  as  follows: 

In  event  of  interest  being  allowed  upon  the  account,  the 
amount  of  such  interest  for  a  given  period  will  be  entered  at 
stated  intervals  among  the  deposits.  On  the  other  side  of 
the  book  may  be  found  occasional  charges  for  the  collection 
of  a  check,  coupon,  or  some  such  item.  (See  "  Collections.") 
This  charge  will  be  evidenced  to  the  depositor  by  a 
slip  of  paper  giving  the  amount  of  the  charge  and  for 
what  it  was  made,  which  is  called  a  "  charge  ticket."  There- 
fore, in  balancing  the  "  check-book," -- and  in  this  con- 
nection it  would  be  well  to  refer  to  that  subject,  —  the 
interest  and  collection  charges  should  be  taken  into  consider- 
ation. 

Any  error  should  be  immediately  reported  to  the  bank 
for  correction. 

To  withdraw  money  from  a  savings  bank,  the  depositor 
may  present  his  book  in  person,  and  have  the  amount  with- 
drawn entered  therein,  besides  signing  in  a  book  kept  by  the 
bank,  the  amount  withdrawn  being  opposite  the  signature. 
This  is  the  bank's  receipt.  To  withdraw  money  when  at  a 


24  MONEY    AND    INVESTMENTS 

distance,  draw  an  order  on  the  bank  following  the  form  gen- 
erally to  be  found  at  the  back  of  every  savings  bank  book, 
and  forward  to  the  bank  with  the  book  itself.  Money  is 
withdrawn  from  national  banks,  trust  companies,  etc.,  by 
the  use  of  checks.  (See  "  Checks.") 

Bank  Check.    Same  as  "  Check." 

Bank  Clearings.    See  "  Clearings." 

Bank  Commissioner.  One  who  examines  into  the  affairs 
of,  and  has  certain  supervision  over,  the  chartered  banks 
in  the  State  under  which  he  is  appointed.  For  example: 
the  Governor  of  the  Commonwealth  of  Massachusetts  ap- 
points a  man  whose  duty  it  is,  with  his  assistants,  to  see  that 
all  the  savings  banks  and  trust  companies  within  the  Com- 
monwealth comply  with  the  laws  regulating  them.  This 
is  largely  done  by  making  periodical  examinations  into  the 
affairs  of  each  institution.  This  board  of  commissioners 
is  empowered  to  pass  upon  and  decide  many  questions  which 
may  be  referred  to  it  by  various  banks  and  trust  companies,1 
such  as  whether  a  particular  investment  may  be  legally 
bought,  etc.  In  fact,  the  powers  are  broad,  and  when  prop- 
erly exercised  there  should  be  comparatively  few  financial 
disasters  among  the  banks  and  trust  companies  over  which 
it  has  control. 

Bank  Deposit.    See  "  Deposit." 

Bank  Discount.  Simple  interest  paid  the  lender  of  money 
in  advance,  the  sum  being  reckoned  upon  the  face  value  of 
the  note  or  other  obligation. 

Bank  Draft  (or  Banker's  Draft).  (See  "  Draft.")  A 
"  draft  "  drawn  by  one  bank  or  banker  against  another. 

Banked.  In  financial  slang,  to  be  backed  with  money  by 
some  one  else.  He  "  banked  "  Smith  in  the  enterprise;  that 
is,  furnished  the  money. 

Banker.  It  seems  hardly  necessary  to  define  this  term 
other  than  to  say  that  the  "  banker,"  in  general,  is  a  custo- 
dian of  the  funds  of  others.  Ricardo  distinguishes  between 
a  "  banker  "  and  a  "  capitalist,"  however,  by  stating  that  the 
function  of  the  former  begins  as  soon  as  he  uses  the  money 
of  others,  but  he  is  only  a  "  capitalist  "  as  long  as  he  uses  his 
own  money. 

The  term  "  banker  "  is  used  in  altogether  too  broad  a 
sense,  and  should  not  include  those  who  make  an  exclusive 
business  of  note  broking,  stock  broking,  etc.,  or  in  cases 
where  no  custodianship  of  money  is  involved. 

"  The  banker  is  a  dealer  in  money  more  precisely  than 
some  writers  have  been  willing  to  grant.  He  is  a  dealer  in 

1  Their  powers  extend  to  certain  other  institutions. 


MONEY    AND    INVESTMENTS  25 

money,    because    money   is,    in    the    ultimate    analysis,    the 
commodity  which  he  promises  to  deliver  on  demand."  1 

Bankers'  Bills  (or  Bills  of  Exchange).  If  the  reader  will 
first  understand  the  meaning  of  "  commercial  bills,"  it  will 
be  seen  that  these  are  "  bills  of  exchange  "  drawn  against  a 
shipment  of  merchandise.  They  are  distinguished  from 
"  bankers'  bills  "  —  which  are  so  called  because  drawn  by 
bankers  rather  than  by  a  shipper  of  merchandise  —  on 
account  of  the  latter's  being  drawn  by  a  banker  in  one  country 
against  one  in  another  with  whom  he  has  credit. 

Banker's  Check.  A  check  drawn  by  one  banker  upon  an- 
other. 

Banker's  Note.  A  promissory  note  of  a  private  banker, 
or  a  banking  house  which  is  not  incorporated. 

Banker's  Sterling.  "  Exchange  "  (to  which  refer)  on  Great 
Britain  as  purchased  at  some  bank  or  banking  house,  as  dis- 
tinguished from  regular  "  bills  of  exchange  "  accompanied  by 
bills  of  lading,  as  held  by  the  sellers  or  exporters  showing 
amount  due  them. 

Bank-Holiday.  A  day,  other  than  Sunday,  in  Great  Brit- 
ain, upon  which  all  negotiable  paper  may  not  be  pre- 
sented or  paid;  banks  are  closed.  In  England,  for  exam- 
ple, Easter  Monday,  Whit  Monday,  and  others  are  "  bank- 
holidays." 

Banking  Power.  By  this  heading  the  wherewithal  for  tlae 
business  of  banking  is  understood,  meaning  the  capital,  de- 
posits, surplus,  undivided  profits,  outstanding  bank  notes, 
etc. 

Banking  Power  of  the  World.  In  1890  Mulhall  estimated  the 
world's  banking  power  was  $15,985,000,000;  in  1905  the 
estimate  was  $34,492,400,000,  divi'ded  between  the  United 
States  at  $15,333,900,000;  and  foreign  countries  at  $19,- 
158,500,000. 

Bank  Money-Orders.  A  form  of  "  money-order  "  sold  by 
banks  in  competition  with  the  United  States  Postoffice  and 
express  companies.  More  than  1,000  banks  have  adopted 
this  "  money-order,"  and  many  have  sold  large  quantities  of 
them;  and,  although  this  plan  was  adopted  but  a  little  more 
than  a  year  ago  and  has  not  permitted  of  a  very  long  test, 
a  number  of  decided  advantages  have  been  discovered  in  the 
issuance  of  such  orders,  aside  from  whatever  profit  there 
may  be.2 

Bank  Note.  Not  real  money,  but  a  substitute  for  money. 
A  bank's  non-interest-bearing  promise  to  pay  lawful  money 

1  Charles  A.  Conant. 

2  The  American  Banker. 


26  MONEY    AND    INVESTMENTS 

to  bearer  on  demand,  the  transfer  from  one  person  to  another 
being  accomplished  by  mere  delivery,  no  indorsement  or 
other  formality  being  required.  (See  "  National  Bank 
Notes.")  Paul  Leroy-Beaulieu  defines  a  "  bank  note  "  as 
a  "  promise  made  by  a  banker  to  pay  a  definite  sum  to  bearer 
at  sight." 

Many  financiers  claim  that  there  is  no  essential  difference 
between  a  "  bank  check  "  and  a  "  bank  note  "  for  the  reason 
that  the  depositor  is  a  voluntary  creditor  of  the  bank,  but 
his  checks  do  not  obtain  wide  circulation  without  indorse- 
ment; while  a  bank  note  finds  circulation  as  a  substitute 
for  money  among  people  who  have  little  or  no  knowledge  of 
the  bank  by  which  it  was  issued.  In  both  cases,  however,  the 
check  and  note  represent  money  and  must  both  be  redeemed 
upon  presentation. 

Bank  of  Circulation.  One  which  issues  bank  notes.  Also 
called  "  bank  of  issue." 

Bank  of  Deposit.1  It  would  seem  that  any  banking  institu- 
tion receiving  deposits  might  properly  be  called  a  "  bank  of 
deposit,"  but  banking  men  understand  an  institution  of  this 
class  to  be  not  a  trust  company,  savings  bank,  or  any  such 
taking  "  time  deposits,"  or  deposits  upon  which  interest  is 
allowed,  but  banks  which  receive  deposits  subject  to  check,  and 
upon  which  no  interest  is  allowed.  State  and  national  banks 
are  of  this  latter  class. 

Bank  of  Discount.  One  which  employs  its  deposits  and 
other  funds  largely  in  discounting  (see  "  Discount  ")  notes, 
bills  of  exchange,  etc.  National  banks  are  of  this  kind,  but 
savings  banks  are  not. 

Bank  of  England.  Known  as  the  "  Old  Lady  of  Thread- 
needle  Street."  Its  corporate  name  is  "  The  Governor  and 
Company  of  the  Bank  of  England."  Situated  in  an  irregular 
square  opposite  the  Royal  Exchange  and  residence  of  the 
Lord  Mayor  in  London;  bounded  on  every  side  by  the  open 
street,  it  covers  about  four  acres,  all  light  being  secured  from 
interior  courts.  The  largest  financial  institution  in  the 
world.  Since  the  great  riot  of  1780  a  guard  of  soldiers  has 
been  marched  into  the  bank  every  night  for  protection. 
The  employees  number  over  925.  The  land  covered  by  this 
building  is  probably  one  of  the  most  valuable  pieces  on  the 
surface  of  the  earth. 

The  original  charter  was  granted  in  1694,  and  its  existence 
is  due  to  one  William  Paterson,2  a  Scotchman.  The  present 

1  Gilbart  said  in  1834  that  "  a  bank  which  receives  lodgments  of  money, 
is  called  a  bank  of  deposit." 

2  Those  interested  in  the  granting  of  this  charter  used  as  an  argument 
that  "  it  would  rescue  the  nation  out  of  the  hands  of  extortioners  and 
usurers,  lower  interest,  raise  the  value  of  land,  revive  and  establish  public 


MONEY    AND    INVESTMENTS  27 

charter  was  granted  in  1844.  The  currency  of  England  to- 
day is  largely  in  the  hands  of  this  bank.  The  "  Bank  of 
England  "  probably  has  greater  influence  upon  the  financial 
concerns  of  the  world  than  any  other  institution.  Its  state- 
ments are  published  weekly,  and  give  the  minimum  rate 
of  discount  at  which  the  Bank  will  handle  first-class  paper. 
The  influence  of  the  Directors'  Meeting,  which  takes  place  on 
every  Thursday,  is  felt  throughout  the  world. 

The  rate  of  discount  established  by  the  "  Bank  of  England  " 
fixes  the  rate  of  interest  allowed  by  all  the  London  joint- 
stock  banks  on  deposits,  such  interest  being  generally  at  the 
rate  of  about  one  and  one-half  per  cent,  less  than  the  "  Bank 
of  England  "  rate  of  discount.  This  rate  of  discount  also 
establishes  the  interest  rates  which  London  banks  allow  on 
cash  balances  of  foreign  correspondents,  as  well  as  the  rate 
of  interest  charged  on  over-drafts;  besides  the  discount  rate 
in  the  open  market  throughout  Great  Britain.  Likewise, 
it  fixes  the  rate  of  discount  on  documentary  bills,  as  to  the 
rebating  of  interest  on  account  of  anticipating  repayment. 
Its  influence  is  felt  on  the  value  of  all  international  bills 
of  exchange.  It  often  works  as  a  protection  to  the  gold 
reserve  held  by  the  bank  itself,  for  it  often  increases  the 
value  of  money  in  London,  checking  exports  of  gold  as  well 
as  encouraging  imports  of  the  same.1 

By  it  are  issued  the  "  Bank  of  England  Notes."  It  allows 
no  interest  on  deposits.  It  is  a  bank  in  which  all  London 
banks  keep  their  reserves.  It  receives  and  disburses  the 
government  funds  and  manages  the  government  debt. 

The  management  of  the  Bank  rests  in  the  hands  of  a  Gov- 
ernor, Deputy  Governor,  and  twenty-four  Directors,  who  are 
elected  by  the  shareholders.  It  is  a  private  corporation. 

Although  the  above  is  but  a  brief  sketch  of  the  "  Bank  of 
England  "  and  the  field  which  it  covers,  yet  it  is  sufficient  to 
make  one  comprehend  the  magnitude  of  this  institution's 
position  in  the  financial  world. 

credit,  extend  circulation,  consequently  improve  commerce,  facilitate  the 
annual  supplies,  and  connect  the  people  the  more  closely  with  the  govern- 
ment." —  Smollett's  History  of  England. 

1  This  fact  was  well  illustrated  by  the  action  of  the  Bank  on  Oct.  19, 
1906,  in  raising  the  discount  rate  to  6%,  it  already  having  previously  been 
raised  to  5%.  This  was  on  Friday.  It  was  natural  to  expect  any  change 
in  the  rate  to  have  been  made  at  the  regular  bank  meeting  on  Thursday. 
There  had  been  a  tremendous  drain  of  gold  to  America,  a  large  demand 
from  Egypt,  and  an  anticipated  demand  from  Argentina,  besides  which 
it  was  reported  that  the  Bank  of  Germany  was  accumulating  gold  for 
Russian  account.  The  reserve  in  the  Bank  of  England  had  been  reduced 
by  gold  withdrawals  to  about  £18,000,000,  and  it  was  to  check  further 
encroachments  upon  this  that  the  sensational  advance  referred  to  was 
made.  This  was  the  highest  rate  since  Friday,  Nov.  1,  1890,  just  before 
the  "  Baring  Panic,"  when  the  rate  was  advanced  to  6%. 


28  MONEY    AND    INVESTMENTS 

Bank  of  England  Discount  Rate.1  Each  week  the  "  Bank  of 
England  "  publishes  a  statement  and  makes  an  announce- 
ment as  to  the  minimum  rate  of  discount  at  which  it  will 
handle  first-class  paper.  This  may  be  better  understood  by 
reading  the  preceding  subject. 

Bank  of  England  Notes.  The  promise  to  pay  of  the  "  Bank 
of  England  "  in  the  form  of  "  paper  money/'  much  the  same 
as  our  "  national  bank  circulation."  The  only  form  of  paper 
money  —  or  bank  bills  —  in  general  use  in  Great  Britain, 
as  the  issues  of  other  banks  are  of  no  great  volume.  The 
"  Bank  of  England  "  has  a  separate  department,  called  the 
"  Issue  Department/'  where  the  notes  are  printed  and  all 
the  machinery  of  issuing,  redeeming,  cancellation,  etc.,  is 
carried  on.  "  Bank  of  England  notes  "  are  secured  to  the 
amount  of  £11,015,100,  by  a  debt  due  to  it  from  the  govern- 
ment. In  that  particular  there  is  quite  a  similarity  to  our 
national  bank  notes  secured  by  a  deposit  of  government 
bonds.  It  is  allowed  to  issue  £7,434,900  against  securities,  and 
against  all  additional  notes  issued  there  must  be  a  deposit  of 
coin  or  bullion.  Although  gold  alone  is  used,  it  is  legally 
permissible  to  use  one-fifth  silver.  As  appeared  in  the 
bank's  statement  of  Nov.  9,  1905,  the  total  amount  of  notes 
issued  was  £48,612,645. 

Bank  of  England  Return.  See  "  Bank  of  England  State- 
ment." 

Bank  of  England  Statement.  An  idea  of  the  weekly  state- 
ment of  the  Bank  of  England  (for  further  information  upon 
this  subject  see  "  Bank  of  England  ")  is  given  from  the 
following,  which  is  the  actual  statement  as  issued  Nov.  9, 
1905: 

ISSUE  DEPARTMENT 

1.  Notes  Issued  £48,612,645     2.  Government  Debt     £11,015,100 

3.  Other  Securities  7,434,900 

4.  Gold  Coin  and  Bullion  30,162,645 


£48,612,645 
BANKING  DEPARTMENT 

5.  Proprietors  Capital     £14,553,000  10.  Government  Securi- 

6.  Rest  3,213,176  ties  £17,039,131 

7.  Public  Deposits  12,141,417  11.  Other  Securities         32,806,689 

8.  Other  Deposits  41,261,064  12.  Notes  19,700,765 

9.  7  day  bills  &  other  bills      103,968  13.  Gold  and  Silver  Coin     1,726,040 

£71,272,625  £71,272,625 

No.  1  needs  no  explanation,  as  that  is  simply  the  bank  circulation. 
No.  2  is  the  debt  due  the  bank  from  the  government,  and  against  which 
the  bank  is  allowed  to  issue  circulation. 

1  Pratt  declares  that  "  The  Bank  of  England  discount  rate  sounds  the 
key-note  of  the  international  monetary  situation." 


MONEY    AND    INVESTMENTS  29 

No.  3.  Through  the  retirement  of  the  banks  issuing  notes  at  the  time  of 
the  Bank  Act  of  1S44,  the  Bank  of  England  has  been  able,  under  the  pro- 
visions of  the  Act,  to  issue  new  notes  against  securities  to  the  amount  of 
£4,450,000,  which  brings  its  total  issue  up  to  £18,450,000. 

No.  4.  In  the  statement  above  there  is  shown  an  issue  of  £48,612,645 
in  notes.  If  we  deduct  from  this  issue  the  £18,450,000,  notes  authorized 
to  be  issued  against  the  government  debt  and  other  securities;  we  find  the 
amount  of  notes  uncovered  —  unsecured  —  to  be  £30,162,645,  which  is 
exactly  the  amount  of  gold  coin  and  bullion  on  hand  in  the  Issue  Depart- 
ment. 

No.  5  represents  the  proprietors'  advances  in  cash  to  the  Government. 
This  is  the  bank's  capital  the  same  as  that  of  any  other  institution. 

No.  6.  Reserve  fund  and  undivided  profits.  This  is  not  allowed  to  fall 
below  £3,000,000,  the  excess  being  considered  available  for  dividends. 

No.  7.  Deposits  made  by  the  Government. 

No.  8.  Deposits  of  banks,  corporations,  firms,  and  individuals. 

No.  9.  Bills  of  exchange,  etc. 

No.  10.  Government  Securities  needs  no  explanation. 

No.  11.  Same  may  be  said  of  this. 

No.  12.  Bank  notes. 

No.  13.  Needs  no  explanation,  other  than  to  say  that  these,  together 
with  the  notes,  constitute  the  real  reserve  of  the  bank  held  against  deposits, 
and  any  changes  are  watched  for  with  keen  interest. 

Bank  of  France.  Established  during  1800  by  Napoleon, 
after  he  became  First  Consul,  who  desired  a  financial  institu- 
tion that  should  not  only  be  of  service  to  the  Government, 
but  also  subservient  to  it.1 

It  has  one  central,  or  head  office,  in  Paris,  but  has  branches 
or  auxiliary  offices  in,  or  is  connected  with,  all  the  principal 
cities  and  towns  in  the  country.  The  governor  and  two  sub- 
governors  are  nominated  by  the  Government,  but  the  general 
council,  consisting  of  fifteen  regents  and  three  censeurs,  are 
chosen  by  the  stockholders,  except  that  three  of  the  regents 
must  be  selected  from  the  treasury  disbursing  agents.  The 
business  of  discounts  and  advances  at  all  its  offices  is  trans- 
acted at  the  same  rates  as  in  Paris,  which  regulates  interest 
rates  throughout  the  country.  The  Bank  has  never  raised 
its  rate  of  discount  over  9%2  and  the  fluctuations  in  its  rate 
have  always  been  less  violent  and  frequent  than  in  the  case 
of  the  Bank  of  England.  From  1844  to  1900  the  rate  of  dis- 
count of  the  former  was  altered  111  times,  and  of  the  latter, 
400  times. 

The  ownership  in  the  Bank  of  France  is  represented  by 
shares  held  by  individuals,  but  is  very  largely  under  the  con- 
trol of  the  Government.  It  is  the  only  institution  in  the 
country  which  can  issue  bank  notes,  which  is  done  under 
the  direction  of  the  regents,  who  are  responsible,  and  report 
to  the  Government.  The  only  security  behind  the  notes  is 
the  general  assets  and  credit  of  the  Bank,  although,  in  case 
of  necessity,  the  Government  would  sustain  the  bank  with 

1 "  The  Modern  Bank,"  A.  K.  Fiske. 

2  "  Bank  Rate  and  the  Money  Market,"  R.  H.  Inglis  Palgrave. 


30  MONEY    AND    INVESTMENTS 

its  credit.  These  notes  are  legal  tender  so  long  as  they  are 
redeemed  in  specie.  The  maximum  limit  of  issue  has  been 
increased  until  now  it  stands  at  5,800,000,000  francs.1  Al- 
though no  special  reserve  is  held,  the  Bank  makes  a  point  of 
retaining  on  hand  a  large  amount  of  bullion  and  coin.  It 
protects  its  gold  reserve  by  charging  a  premium  when  it  is 
demanded  for  export.  From  the  fact  that  checks  are  still 
comparatively  little  used  in  that  country,  bank  notes  and 
specie  are  principally  employed  in  making  payments.  This 
naturally  results  in  the  extensive  use  of  bank  notes  throughout 
the  country,  and  calls  for  a  large  issue  on  the  part  of  the  Bank 
of  France,  which  is  generally  six  or  seven  times  the  amount 
of  the  deposits. 

The  Bank  receives  deposits  of  public  money,  and  is,  to  a 
great  extent,  the  Government's  fiscal  agent. 

Bank  of  Germany.  The  Imperial  Bank  of  Germany;  com- 
monly called  the  Reichsbank.  The  King  of  Prussia  in  1765 
founded  a  State  institution  entitled  The  Royal  Bank,  which 
continued  until  1846,  when  it  underwent  a  change  and  became 
a  bank  of  issue.  On  the  31st  of  December,  1875,  it  was  suc- 
ceeded by  the  Imperial  Bank  of  Germany.  This  institution, 
like  the  Bank  of  France,  is  under  governmental  control,  but 
its  ownership  is  represented  by  shares  in  the  hands  of  in- 
dividuals. It  is  situated  in  Berlin,  where  it  carries  on  a  very 
large  business,  but  also  has  branches  forming  a  net  work 
throughout  Germany.  It  receives,  holds,  and  disburses  the 
government  funds,  discounts  bills,  both  inland  and  foreign, 
which  is  a  very  large  proportion  of  its  business,  receives 
deposits  and  issues  circulation,  but  is  compelled  by  law  to 
retain  in  its  vaults  cash  to  the  amount  of  one-third  of  its 
notes  outstanding,  which  cash  must  consist  of  legal  tender 
notes  of  the  Empire,  gold  bars,  or  foreign  coins  of  a  prescribed 
weight  and  fineness.  The  remainder  must  be  represented  by 
discounted  bills.  Its  notes  are  not  legal  tender,  but  must  be 
paid  in  gold  upon  presentation  at  any  of  its  branches.  They 
have  no  prior  claim  upon  the  bank's  assets,  but  are  simply 
part  of  the  general  liabilities.  There  are  three  limitations 
placed  upon  the  note  issue;  first,  no  more  than  472,829,000 
marks,2  which  is  called  its  "  Kontingent,"  can  be  issued  in 
excess  of  what  is  covered  by  the  cash  reserve;  second,  a  5% 
per  annum  tax  on  any  excess  above  this  limit;  and,  third, 
the  one-third  cash  holding  already  mentioned.3 

1  Law  of  February  11,  1906. 

2  This  sum  is  subject  to  further  increase,  for  as  a  smaller  bank  of  issue 
in  Germany  goes  out  of  business  its  "  Kontingent  "  passes  to  the  Reichs- 
bank, and  so  increases  the  latter's  limit  by  whatever  the  limit  was  of  the 
bank  giving  up. 

3  "  Bank  Rate  and  the  Money  Market  in  England,  France,  Germany, 
Belgium,  and  Holland,  1844-1900,"  R.  H.  Inglis  Palgrave. 


MONEY    AND    INVESTMENTS  31 

| 

All  other  banks  throughout  the  Empire  must  agree  in  their 
discount  rate  with  that  of  the  Reichsbank  when  it  is  as  high 
as  4%  and  when  it  is  lower  must  not  cut  under  it  more  than 
one-quarter  of  1%. 

The  rate  of  discount  has  been  raised  to  7%  but  once  in 
thirty  years  —  December  19,  1899,  to  January  11,  1900  — 
and  has  never  exceeded  that  figure.1 

Bank  of  Issue.  Any  bank  authorized  by  law  to  issue  money 
of  its  own  in  the  form  of  "  bank  notes;  "  to  issue  paper 
money  to  circulate  as  currency.  National  banks  are  such, 
and  so  formerly  were  State  banks,  which  issued  "  State  Bank 
Notes,"  until  1865,  when  Congress  passed  an  act  taxing  such 
notes  10%,  which  resulted  in  their  speedy  retirement. 

Bankrupt.2  When  one  is  unable  to  meet  his  debts  as  they 
fall  due  he  may  make  a  fair  statement  of  his  condition  out 
of  court  in  order  to  pay  his  creditors,  and  effect  a  settlement 
with  them  on  what  may  seem  to  them  the  best  obtainable 
basis,  and,  after  accomplishing  such  a  settlement,  receive  a 
discharge  from  them  relieving  the  insolvent  party  from  any 
further  obligation  to  his  creditors.  But,  when  unable  to  make 
a  satisfactory  settlement,  he  may  take  advantage  of  what 
is  known  as  the  National  Bankruptcy  law  and  go  through 
"  bankruptcy,"  by  giving  up  all  his  property  to  be  divided 
among  his  creditors,  by  which  method  he  compels  them  to 
make  a  settlement,  and  after  the  accomplishing  of  which,  he 
receives  a  legal  discharge,  freeing  him  from  further  liability 
on  account  of  any  unpaid  portion  of  the  debts,  providing,  of 
course,  he  does  not  defraud  his  creditors  by  the  concealing 
of  property,  of  which,  if  afterwards  discovered,  the  law  would 
usually  allow  the  creditors  to  take  possession. 

"  Involuntary  bankruptcy  "  is  brought  about  by  the  action 
of  creditors;  the  "  insolvent  "  person  is  forced  into  "  bank- 
ruptcy." 

"  Voluntary  bankruptcy  "  is  brought  about  by  the  action 
of  the  debtor  or  the  "  insolvent."  3 

1  Report  of  the  Special  Currency  Commission  of  the  Chamber  of  Com- 
merce of  the  State  of  New  York.    (Oct.  4,  1906.) 

2  The  Italian  word  "  banco,"  meaning  a  "  bench,"  gives  us  our  word 
"  bank."    The  Lombardy  Jews  occupied  benches  in  the  market-place,  for 
the  exchange  of  money  and  bills.    If  one  failed,  the  people  broke  his  bench, 
hence  "  bankrupt." 

3  "  Under  the  present  Federal  law  any  person  who  owes  debts,  except 
a  corporation,  may  be  adjudged  a  bankrupt  if  he  wishes  to  take  advantage 
of  the  act.    Such  a  proceeding  is  one  of  voluntary  bankruptcy.    Not  every 
person,  however,  can  be  forced  into  bankruptcy  by  his  creditors.    A  '  wage- 
earner  '  cannot  be,  nor  '  a  person  engaged  chiefly  in  farming  or  the  tillage 
of  the  soil.'    Even  in  the  case  of  a  person  not  belonging  to  one  of  these  ex- 
cepted  classes,  he  must  owe  debts  to  the  amount  of  one  thousand  dollars 
or  over;  he  must  have  committed  an  act  of  bankruptcy,  and  the  aggregate 


32  MONEY    AND    INVESTMENTS 

Bank  Statement.  It  is  customary  in  many  of  the  larger 
cities  to  issue  at  stated  intervals,  generally  once  a  week,  a 
tabulated  statement  of  the  condition  of  the  banks  which  are 
members  of  the  Clearing-House  Association. 

At  about  11.30  in  the  forenoon  of  the  last  business  day  of 
each  week,  the  "  New  York  Bank  Statement  "  is  issued  to 
the  public,  and  is  awaited  with  great  interest  by  financial 
men.  Each  bank  in  that  city,  national  and  State,  belonging 
to  the  Clearing-House  Association,  tabulates  a  statement 
giving  the  average  of  each  item  for  the  period  covering  all 
the  preceding  business  days  of  that  week  and  the  last  business 
day  of  the  previous  week. 

Saturday  morning  —  or  Friday,  if  Saturday  is  a  holiday  — 
these  averages  for  each  bank  are  turned  in  to  the  Clearing- 
House  manager,  who  proceeds  in  a  similar  manner  to  obtain 
the  average  of  each  item  for  the  combined  statement.  The 
"  bank  statement  "  deals  with  averages  for  the  period  covered, 
and  never  reflects  actual  conditions  at  the  date  of  issue. 
A  separate  statement  is  issued  by  the  "  non-member  banks," 
i.  e.  banks  which  are  not  members  of  the  Association,  but 
"  clear  "  through  banks  which  are. 

Not  so  much  value  is  now  placed  upon  the  "  bank  state- 
ment "  as  before  the  tremendous  increase  in  the  number  of 
trust  companies  and  their  resources,  as,  on  account  of  their 
not  being  included  directly  in  it,  no  true  condition  of  the 
banking  institutions  is  obtainable.  These  unknown  figures 
of  the  trust  companies  render  the  "  bank  statement  "  a  very 
incomplete  affair.  Again,  the  statement  may  be  purposely 
made  misleading  by  sudden  withdrawals,  or  deposits,  by  the 
trust  companies,  large  moneyed  firms  and  institutions  carry- 
ing accounts  with  the  Clearing-House  Association  banks. 
This  Wall  Street  system  of  jugglery  is  attempted  in  order  to 
influence  the  loaning  rates  of  money,  and,  furthermore, 
through  a  change  in  loaning  rates  to  affect  the  prices  of 
stocks.  The  trust  companies  issue  a  report  twice  a  year. 

The  New  York  Sun  well  expresses  this  "  wheel  within  a 
wheel  "  system,  as  follows: 

"  As  the  power  of  the  trust  companies  to  lend  money  de- 
pends upon  the  quantity  of  cash  possessed  by  them,  and  as 
all  but  a  trifling  portion  of  this  cash  is  kept  by  the  trust  com- 
panies in  the  banks  rather  than  in  their  own  coffers,  the  total 
quantity  of  cash  held  by  the  banks  comprises  in  substance 
the  entire  lendable  funds  of  the  community.  It  is  also  evident 
that  this  sum  constitutes  the  sole  cash  reserve  standing 
against  the  loans  of  banks  and  trust  companies  combined. 

of  his  property  at  a  fair  valuation  must  be  insufficient  to  pay  his  debts, 
or  he  cannot  be  declared  a  bankrupt  in  an  involuntary  proceeding."  — 
Frauds  M.  Burdick. 


MONEY    AND    INVESTMENTS 


33 


According  to  the  Clearing-House  statement  Saturday,  the 
total  volume  of  bank  cash  was  $278,723,600,  and  of  the  bank 
loans  $1,085,825,900,  and  while  trust  company  loans  can  only 
be  estimated,  the  fact  that  they  stood  at  $845,000,000  June 
30  and  have  been  unquestionably  heavily  increased  since  that 
time,  notably  in  the  last  two  weeks,  makes  it  manifest  that 
the  total  quantity  of  outstanding  credits  in  the  community 
at  present  is  not  far  from  two  billions  of  dollars,  against 
which  there  is  a  present  reserve  of  but  about  13  per  cent."  1 

For  an  explanation  of  the  items  in  the  "  bank  statement," 
such  as  "  reserve,"  "  surplus  reserve,"  etc.,  reference  may  be 
made  to  the  separate  subjects  elsewhere. 

NEW  YORK   BANK  STATEMENT   FOR  SATURDAY,   APRIL  28,    1906 


Loans 
Circulation 
Net  deposits 
Specie 

Legal  tenders 
Reserve  held 
Legal  reserve 
U.  S.  deposits 
Reserve  (new) 
Surplus  (new) 
Surplus  (old) 

Bargain.  Besides  the  ordinary  meanings  for  this  word, 
which  are  unnecessary  here,  it  is  used  in  London  to  indicate 
transaction  between  two  members  of  the  stock  exchange. 
(See  "  London  Stock  Exchange  Transactions.") 

Bargain  Counter.  When  securities  are  for  sale  cheap  they 
are  "  on  the  bargain  counter." 

Bar  Gold.  London  quotations  of  "  bar  gold  "  are  frequently 
seen,  as  77s.  9fd.,  meaning  the  open  market  price  of  gold  in 
the  form  of  bars  of  the  British  standard,  which  is  11-12  fine. 
The  Bank  of  England  is  compelled  by  law  to  pay  77s. 
per  ounce  for  all  gold  offered,  the  mint  value  being  77s. 
which  equals  our  own  mint  price  per  ounce  of  "  fine  gold  " 
of  $20.672. 

When  in  London  the  market  price  of  "  bar  gold  "  falls 
below  77s.  lOirf.  per  ounce,  gold  imports  are  favoured  to  the 
extent  of  the  difference.  The  more  the  price  of  gold  advances 
in  London,  the  greater  must  be  the  fall  of  "  sterling  ex- 
change "  in  America  to  make  gold  imports  permissible. 

On  September  20,  1906,  the  Bank  of  England  obtained  a 
price  of  78s.  Id.  for  £200,000  bar  gold  —  a  record  price. 

1  On  April  30,  1906,  a  law  went  into  effect  by  which  the  trust  companies 
of  New  York  State  are  now  obligedTOTBaiatain  a  "  reserve." 


CHANGES  FROM 

1906 

PREVIOUS  WEEK 

1905 

$1,039,210,500 

Inc. 

$21,781,500 

$1,097,902,100 

51,138,400 

Dec. 

342,900 

44,149,200 

1,028,683,200 

Inc. 

21,218,900 

1,146,528,600 

186,734,300 

Dec. 

2,919,300 

217,715,100 

80,803,900 

Inc. 

2,224,700 

85,582,300 

267,538,200 

Dec. 

694,600 

303,297,400 

257,170,800 

Inc. 

5,304,725 

286,632,150 

28,953,300 

Inc. 

11,515,200 

16,818,800 

249,932,475 

Inc. 

2,425,925 

282,427,450 

17,605,725 

Dec. 

3,120,525 

20,869,950 

10,367,400 

Dec. 

5,999,325 

16,665,250 

34  MONEY    AND    INVESTMENTS 

Baring  Panic.  During  the  autumn  of  1890,  when  specula- 
tion on  the  London  Stock  Exchange  was  running  riot,  prin- 
cipally in  regard  to  securities  of  the  Argentine  Republic, 
including  not  only  the  national  obligations,  but  municipal 
loans  and  investments  in  commercial  enterprises,  a  cloud 
began  to  appear  in  the  financial  sky.  The  great  banking 
house  of  Baring  Bros,  was  on  the  edge  of  collapse.  The 
failure  of  that  great  firm  of  bankers  would  undoubtedly  take 
down  with  it  many  other  moneyed  institutions,  and  such  a 
disaster  in  London's  financial  centre  would  carry  untold 
misery  to  the  rest  of  the  financial  world. 

The  forerunner  of  impending  disaster  was  already  begin- 
ning to  be  felt  and  the  feeling  that  the  world's  finances  were 
standing  on  the  brink  of  disaster  was  apparent  everywhere. 
The  actual  realization,  however,  was  averted  by  a  heroic 
effort  on  the  part  of  the  Governor  of  the  Bank  of  England, 
who  obtained  a  loan  of  gold  from  the  Bank  of  France,  and 
St.  Petersburg,  against  which  an  issue  of  paper  money  was 
made  by  the  Bank  of  England  to  temporarily  accommodate 
the  public. 

He  also  persuaded  many  of  the  leading  bankers  of  London 
to  unite  and  subscribe  a  large  guarantee  fund,  and  the  total 
assets  of  the  Baring  Bros,  were  taken  over,  the  Bank  of 
England,  liquidated,  and  eventually  a  large  surplus  returned 
to  that  firm.  Therefore,  by  a  wise  and  prompt  action  on  the 
part  of  Mr.  Lidderdale,  then  the  Governor  of  the  Bank  of 
England,  a  world  panic  was  prevented. 

Barometer  Stocks.  Certain  standard  and  active  stocks  the 
prices  of  which  are  averaged  daily  (except  on  Sundays  and 
stock  exchange  holidays) ;  the  rise  or  fall  of  the  average  price 
being  a  good  indication  of  the  trend  of  the  market,  and  a 
comparison  with  previous  averages  helpful  to  those  interested. 

Bar  Silver.  Silver  as  it  comes  from  the  smelter  in  the  form 
of  bars  and  which  has  not  been,  or,  in  fact,  may  never  be, 
minted  into  coins.  On  June  30,  1904,  the  commercial  value 
of  an  ounce  of  fine  silver  was  57.339  cents,  and  in  a  silver 
dollar  the  commercial  value  of  the  silver  was  44.348  cents. 
There  has  been  a  continued  advance  recently  in  the  price  so 
that  at  the  time  of  writing  (November  9,  1906),  it  is  $.71952 
per  ounce.  This  rise  has  been  brought  about  by  a  deficiency 
in  the  supply  resulting  from  the  steady  drain  to  India  and 
China,  together  with  the  demand  from  France  and  Russia 
for  coinage  purposes.  The  increase  in  the  world's  production 
of  gold  has  undoubtedly  influenced  the  advance  in  price  of 
silver.  There  is  also  almost  constant  speculation  in  the 
metal  in  London,  where  "  bar  silver  "  is  bought  and  sold  as 
a  hedge  against  business  transactions.  A  recent  estimate  of 


MONEY    AND    INVESTMENTS  35 

the  annual  production  was  only  175,000,000  ounces,  of  which 
it  is  believed  about  60,000,000  are  consumed  in  the  arts,  and 
a  like  amount  shipped  to  the  far  East.  On  November  27, 
1902,  the  price  of  silver  in  London  fell  to  21  11-16  pence 
(about  43  cents)  per  ounce,  which  is  the  lowest  price  in  the 
world's  history.  On  September  3,  1890,  the  price  in  New 
York  was  $1.21. 

Bay  Shilling.     See  "  Pine  Tree  Money." 

"  B  "  Bond  (or  "  B  "  Stock).  Used  when  securities  are 
divided  into  classes,  such  as  "  A  bond,"  "  B  bond."  (See 
"  Preferred  Stock.") 

Bear.  One  who  believes  that  conditions  are  ripe  for  a 
decline  in  prices  or  one  who  desires  such  an  event,  and  talks 
"  bearish  "  accordingly.  One  may  believe  that  the  price  of 
a  certain  security  is  about  to  decline,  and,  therefore,  is  said 
to  be  a  "  bear  "  on  that  particular  security,  whereas  he  may 
not  necessarily  be  so  on  others.  The  natural  attitude  of  a 
"  bear  "  is  that  of  a  seller,  but  he  may  be  so  for  the  sake  of 
buying  later  at  a  lower  price.  It  is  said  that  the  greatest 
"  bears  "  are  "  bulls  "  who  have  sold  out  their  holdings. 

Bear  Clique.  Those  whose  interests  lie  in  the  direction  of  a 
decline  in  price  of  one  of  several  securities,  or  market  prices 
in  general,  and  who  unite  in  mutual  efforts  to  obtain  such  a 
result.  A  "  bear  clique  "  in  Union  Pacific,  for  instance,  is  a 
combination  formed  to  effect  a  decline  in  price  of  Union 
Pacific  common  stock.  (See  "  Clique.") 

Bearing  the  Market.  An  artificial  lowering,  or  forcing 
down,  of  prices. 

Bear  Market.  (See  "  Bear.")  When  so  many  are  bears  that 
their  influence  is  predominant  in  the  market  a  "  bear  market  " 
is  said  to  exist,  or  a  general  fall  in  prices. 

Bear  Panic.     A  sudden  and  great  advance  in  prices  of  a 
certain  stock  may  cause  those  who  have  been  trying  to  de- 
press —  "  bears  "  —  and  who  have  gone  "  short  "  of  it,  to 
suddenly,    with    panic-stricken    energy,    try    to    buy    in  — 
"  cover  "  —  what  is  needed  to  fill  their  contracts. 

Bear  Pool.  See  "  Bear  Clique."  The  difference  between  a 
"  pool  "  and  "  clique  "  is  explained  under  the  latter  subject. 

Bear  Raid.  When  those  who  are  "  short  "  of  the  market 
desire  to  "  cover  "  and  there  happens  to  be  at  the  same  time 
a  considerable  "  long "  interest,  the  "  bears "  may  take 
advantage  of  this  knowledge  and  by  "  selling  short "  so 
force  prices  down  that  those  who  are  "  long  "  will  be  obliged 
to  sell;  thus  permitting  the  "  shorts  "  to  buy  in,  i.  e.  "  cover  " 
at  a  profit.  (An  explanation  of  the  terms  in  quotation  marks 
will  be  found  under  the  separate  subjects.) 


36  MONEY    AND    INVESTMENTS 

Below  Par.    A  price  less  than  face  value.     (See  "  Par.") 

Belt  Lines.  Short  lines  of  railroad  located  at  terminal 
points  for  the  purpose  of  transferring  traffic  from  one  railroad 
to  another.  The  name  originated  because  of  railroads  ap- 
proaching a  city  from  different  directions  and  finding  the 
necessity  of  connecting  with  one  another  over  another  line 
of  rails,  which,  owing  to  the  density  of  the  population,  have 
generally  followed  a  circular  or  belt  course  around  all  or  a 
portion  of  the  city.  Where  there  are  two  or  these  belt  systems, 
one  encircling  the  other,  they  are  often  distinguished  by  being 
known,  one  as  the  "  inner  belt  "  and  the  other  as  the  "  outer 
belt." 

"  Belt  lines  "  are  valuable  and  necessary  properties,  and 
as  a  rule,  have  proved  good  investments. 

Beneficial  Interest.  "  Certificate  of  Beneficial  Interest." 
Example:  The  Temple  Iron  Co.  is  controlled  by  certain  rail- 
road companies,  and  operated  in  their  mutual  interests. 
The  latter,  not  wishing  to  use  their  funds  for  investment  in 
the  Temple  Iron  Co.,  but,  at  the  same  time,  wishing  to  retain 
its  voting  control,  sell  certificates  of  "  beneficial  interest," 
equal  in  their  total  amount  to  the  capital  stock  of  the  Temple 
Iron  Co.  Such  "  beneficial  interest  "  conveys  to  the  investor 
the  right  only  to  receive  dividends,  and  right  to  the  equity 
in  the  property  in  case  of  financial  disaster  to  it.  These 
certificates  were  issued  by  the  Guaranty  Trust  Co.  of  New 
York,  certifying  that  the  actual  stock  of  the  Temple  Iron  Co. 
was  deposited  with  it,  and  that  the  voting  power  of  such  stock 
rested  with  the  company.  To  a  certain  extent  the  railroads 
"  ate  their  cake  and  had  it  too;  "  that  is,  they  obtained  money 
from  investors  at  the  latter's  own  risk,  for  the  benefit  of  the 
railroad  companies,  without  the  necessity  for  investment 
upon  their  part,  enabling  them  to  so  control  the  output  of 
the  Temple  Iron  Co.  that  the  railroads  in  interest  should  get 
the  benefit  of  its  freight. 

One  meaning  of  "  beneficial  "  in  a  general  sense  is  that  of 
a  dependent  or  secondary  possession,  from  which  must  arise 
its  use  as  above  outlined. 

Berlin  Discounts.  Rates  at  which  good  "  commercial 
paper  "  is  being  "  discounted  "  (read  "  Discounted  ")  at  that 
point. 

Betterment  (or  Improvement).  When  a  railway  company 
replaces  a  60  Ib.  rail  with  a  90  Ib.  rail,  the  cost  of  the  addi- 
tional 30  Ibs.  of  metal  per  yard  is  usually  charged  first  to  a 
"  betterment  account  "  or  "  improvement  account."  The 
question  as  to  how  it  should  be  eventually  treated  at  the  end 
of  a  fiscal  year  depends  largely  upon  the  financial  condition 
of  the  company.  One  which  is  prosperous  very  likely  may 


MONEY    AND    INVESTMENTS  37 

charge  this  directly  to  "  operating  expense;  "  otherwise,  it 
may  be  charged  to  "  capital  account "  or  "  construction 
account,  "  but  only  companies  of  limited  financial  resources 
would  so  treat  an  expenditure  of  this  nature.  Many  experts 
hold  that  the  capitalization  of  a  "  betterment  "  should  be 
only  in  proportion  to  the  increased  earning  ability  conferred 
upon  the  property  by  the  "  betterment."  (See  subjects  in 
quotations.) 

Bid.    (See  "  Bid  Price.")    Sometimes  called  a  "  tender." 

Bidding  Up.  An  advance  in  prices  brought  about  by  bidding 
higher  and  higher,  always  a  little  above  the  last  actual  sale. 

Bid  Price.  The  price  offered,  or  "  bid,"  for  any  security  or 
commodity.  The  "  bid  price  "  of  Western  Union  Telegraph 
stock  is  95  when  that  is  the  price  at  which  it  can  be  sold. 
(See  also  "  Sealed  Bid.") 

Bids  and  Offers.  All  offers  to  buy  or  sell  securities  in  the 
New  York  Exchange  are  for  100  shares  of  stock  or  for  $10,000 
par  value  of  bonds  unless  otherwise  stated. 

Bids  and  offers  may  be  made  only  as  follows: 

"  Cash,"  i.  e.  for  delivery  upon  the  day  of  contract. 

"  Regular  way,"  i.  e.  for  delivery  upon  the  business  day 
following  the  contract. 

"  At  three  days,"  i.  e.  for  delivery  upon  the  third  day  fol- 
lowing the  contract. 

"  Buyer's  "  or  "  seller's  "  options  for  not  less  than  four  days 
nor  more  than  sixty  days.  (See  "  Buyer's  Option  "  and 
"  Seller's  Option.") 

Bids  and  offers  made  without  stated  conditions  shall  be 
considered  to  be  in  the  "  regular  way." 

"  Bids  or  offers  "  shall  not  be  made  at  a  less  variation  than 
one-eighth  of  one  per  cent. 

"  Bids  and  offers  "  shall  be  made  on  the  basis  of  a  percent- 
age of  the  par  value  of  the  securities  dealt  in;  except  that  in 
securities  of  a  par  value  of  ten  dollars  or  less  per  share  the 
bid  and  offer  shall  be  in  dollars  or  fractions  thereof. 

In  all  deliveries  of  securities,  the  party  delivering  shall  have 
the  right  to  require  the  purchase  money  to  be  paid  on  de- 
livery; if  delivery  is  made  at  transfer,  payment  may  be 
required  at  time  and  place  of  transfer.1 

After  the  dealing  in  "  puts  "  and  "  calls  "  had  been  pro- 
hibited by  the  directors  of  the  Chicago  Board  of  Trade, 
similar  methods  were  attempted  under  another  name  called 
"  bids  and  offers,"  which  is  nothing  more  or  less  than  a  modern 
name  for  "  puts  "  and  "  calls,"  which  will  be  found  explained 

1  The  foregoing  matter  under  "  Bids  and  Offers  "  is  from  the  Constitu- 
tion of  the  New  York  Stock  Exchange,  and  contains  most  of  its  important 
rules  in  connection  therewith. 


38  MONEY    AND    INVESTMENTS 

under  those  subjects.    The  Appellate  Court  has  just  rendered 
a  decision  to  the  effect   that   transactions  of    this   kind  — 
"  bids  and  offers  "    —  are  prohibited  under  the  Illinois  statutes. 
Big.     Preferred  stock. 

Big  Four.  Cleveland,  Cincinnati,  Chicago  &  St.  Louis  Rail- 
way Company. 

Big  Katy.  The  preferred  stock  in  the  Missouri,  Kansas 
and  Texas  Railway  Co. 

Big  Kitty.     Same  as  last  subject. 

Big  NPR.  (Nipper).  Northern  Pacific  R.  R.  Co.  preferred 
stock. 

Big  Steel.  The  preferred  stock  of  the  United  States  Steel 
Corporation. 

Big  Three.  The  name  applied  to  the  three  largest  life  in- 
surance companies  of  New  York  City;  namely,  The  New  York 
Life  Insurance  Co.,  The  Equitable  Life  Assurance  Society, 
and  The  Mutual  Life  Insurance  Company  of  New  York. 

Big  Union.    Union  Pacific  Ry.  Co.  preferred  stock. 

Bill.  "  Bill  of  Exchange."  This  term  is  also  extended  not 
only  to  the  ordinary  bill,  or  statement,  of  money  due,  as  a 
grocer's  bill,  etc.,  but  to  cover  a  promissory  note,  or  any  paper 
demanding  money  settlement.  In  the  language  of  the  "  clear- 
ing-house "  "  bill  "  refers  to  bank  bills  or  government  notes. 

Bill  at  Sight.  Same  as  "  Sight  Bill  "  or  "  Draft."  (See 
"  Sight  Draft.") 

Bill-Book.    A  bank's  record  of  drafts,  notes,  etc. 

Bill  Broker.  In  England,  one  who  makes  a  business  of 
handling  promissory  notes,  "  bills  of  (inland)  exchange,"  etc. 
Sometimes  called  "  bill  merchant." 

Bill  Merchant.     See  "  Bill  Broker." 

Bill  of  Credit.  Really  paper  money  issued  by  authority  of 
a  government.  No  better  definition  has  ever  been  given  than 
that  of  Chief  Justice  Marshall,  who  defined  a  "  bill  of  credit  " 
as  "  paper  issued  by  the  sovereign  authority  and  intending 
to  circulate  as  money."  The  Constitution  of  the  United 
States  provides  that  the  Legislature  of  the  United  States  shall 
have  power  to  borrow  money  and  emit  "  bills  of  credit  "  of  the 
United  States.  The  Constitution  further  provides  that  the 
individual  States  shall  not  emit  "  bills  of  credit  "  or  make 
anything  but  gold  and  silver  coin  a  tender  in  payment  of  debts. 

Bill  of  Exchange.1  (See  first  paragraph  under  "  Ex- 
change.") 

1 "  Bills  of  exchange  are  said  to  have  been  invented  in  the  14th  century, 
by  the  Jews  or  the  Lombards,  for  the  purpose  of  withdrawing  their  prop- 
erty from  the  countries  from  which  they  were  expelled."  —  J.  W .  Gilbart. 


MONEY    AND    INVESTMENTS  39 

The  laws  of  one  of  our  States  well  defines  a  "  bill  of  ex- 
change "  as  follows:  "  A  bill  of  exchange  is  an  unconditional 
order  in  writing  addressed  by  one  person  to  another,  signed 
by  the  person  giving  it,  requiring  the  person  to  whom  it  is 
addressed  to  pay  on  demand  or  at  a  fixed  or  determinable 
future  time  a  sum  certain  in  money  to  order  or  to  bearer."  1 

Bill  of  Lading.  A  receipt  given  by  land  or  water  transpor- 
tation companies  for  goods  accepted  for  shipment,  and  which 
is  the  shipper's  evidence  of  the  fact. 

Bill  of  Sale.  A  paper  which  conveys  interest  or  right  in 
personal  property  from  one  party  to  another. 

Bills.    An  abbreviated  expression  for  "  bills  of  exchange." 

Bills  Payable.  A  person's  "  bills  payable  "  are  all  his  un- 
paid evidences  of  indebtedness,  such  as  notes,  acceptances, 
etc.,  held  by  others  against  him.  (See  "  Accounts  Payable  " 
and  "  Notes  Payable.")  They  are  "  bills  payable  "  from  the 
standpoint  of  the  person  owing  them  and  "  bills  receivable  " 
from  the  standpoint  of  those  to  whom  they  are  due.  The  dis- 
tinction between  "  bills  payable  "  and  "  receivable  "  and 
"  notes  payable  "  and  "  receivable  "  is  that  in  the  former  case 
they  represent  indebtedness  due  or  receivable  for  goods 
bought  or  sold  or  services  rendered,  whereas  they  become 
"  notes  payable  "  or  "  notes  receivable  "  when,  instead  of 
payment  in  cash  being  made  for  the  sum  due,  a  note  or  other 
formal  instrument  of  indebtedness  is  given  in  lieu  thereof. 
"  Notes  payable  "  or  "  notes  receivable  "  would  also  include 
evidences  of  indebtedness  for  money  in  the  direct  form  of 
loans. 

Bimetallic  Standard.  The  use  of  two  metals  as  a  standard. 
(See  next  subject.) 

Bimetallism.  In  reference  to  the  currency  question,  the 
free  coinage  and  use  of  both  gold  and  silver  as  legal  tender 
to  any  amount  at  a  standard  of  value  established  by  law,  is 
known  as  "  bimetallism;  "  the  system  of  coinage  by  which 
both  gold  and  silver  coins  (or  any  two  metals)  are  recognized 
as  legal  tender  to  any  amount. 

Bingham.  Bingham  Consolidated  Mining  &  Smelting  Co. 
(Gold  and  Copper.) 

Biscuit.     National  Biscuit  Co. 

Bit.  A  term  much  in  use  upon  the  Pacific  Coast  as  the 
equivalent  of  12^  cents.  "  Two  bits  "  is  the  ordinary  ex- 
pression there  for  a  "  quarter  "  or  25c. 

Black  Friday.  September  24,  1869.  One  of  the  greatest 
convulsions  of  the  many  that  Wall  Street  has  experienced. 
Jay  Gould  and  his  partner,  James  Fisk,  had  engineered  a  bull 

1  Michigan,  Act  265,  P.  A.  1905. 


40  MONEY    AND    INVESTMENTS 

movement  in  gold  which  had  advanced  to  162^.  The  Govern- 
ment suddenly  broke  the  "  corner  "  by  buying  $4,000,000 
of  its  own  bonds  with  gold,  and  a  financial  upheaval 
followed.1 

Bland-Allison  Law.  In  1878  the  bill  which  had  been  intro- 
duced into  the  House  of  Representatives  by  Mr.  Bland  and 
afterwards  amended  by  Mr.  Allison,  became  a  law  on  February 
28th,  which  provided  for  the  purchase  from  time  to  time  of 
silver  bullion  at  the  market  price  to  the  amount  not  less  than 
$2,000,000  per  month  nor  exceeding  $4,000,000  per  month. 
It  provided  for  its  coinage  into  silver  dollars  of  412^  grains  as 
fast  as  purchased.  As  first  introduced  by  Mr.  Bland  the  bill 
provided  for  what  is  known  as  a  "  free  coinage  of  silver  " 
at  the  ratio  of  16  to  1 ;  namely,  the  coinage  of  silver  upon  the 
same  terms  as  gold.  The  "  Bland-Allison  Law  "  was  repealed 
in  1890  and  superseded  by  what  is  known  as  the  Sherman 
Act,  to  which  refer.2 

Bland  Bill  (or  Law).     See  "  Bland- Allison  Law." 

Bland  Dollar.  Another  name  for  the  "  standard  silver 
dollar,"  but  uncommonly  so. 

Blanket-Mortgage.  A  mortgage  covering  several  different 
properties,  or  a  collection  of  properties,  and  given  to  secure 
a  single  debt,  or  sometimes  given  to  secure  indebtedness 
previously  created  in  different  forms.  When  a  mortgage  of 
this  kind  is  given,  an  underlying  lien  (indebtedness  having 
prior  claim)  is  generally  implied.  The  usage  of  this  term  is, 
after  all,  somewhat  vague.  It  is  occasionally  applied  in  about 
the  same  sense  as  "  general  mortgage,"  but,  the  writer  thinks, 
improperly  so,  unless,  possibly,  upon  a  system  composed  of 
two  or  more  companies,  for  there  is,  perhaps,  this  difference: 
The  latter  covers  property  owned  by  one  corporation,  and 
used  in  the  general  conduct  of  its  business,  as  a  railroad,  for 
instance,  whereas  a  "  blanket  mortgage  "  more  particularly 
covers  several  separate  properties,  each  of  which  may  have 
no  similar  or  common  use  with  the  others.  A  mortgage  might 
be  issued  to  cover  a  property  under  construction,  and  so 
worded  as  to  also  cover  the  property  when  completed;  all 
equipment,  future  acquired  property,  etc.  This  would  really 
be  a  "  first  mortgage,"  and  so  called,  as  there  is  a  certain 
dislike  to  the  term  "  blanket  mortgage,"  and,  although  in  the 
case  just  cited  the  mortgage  might  also  be  considered  a 
"  blanket  "  first  mortgage,  on  account  of  its  liberal  provisions 

1  There  have  been  other  days  than  the  one  mentioned  above  which  are 
also  referred  to  as  "  Black  Fridays."  At  the  time  of  the  failure  of  the 
large  London  banking  house  of  Overend  &  Gurney,  May  11,  1866,  a  catas- 
trophe followed  which  resulted  in  the  designation  of  "  Black  Friday  "  for 
that  day. 

2  United  States  Treasury  Department  Circular,  No.  72. 


MONEY    AND    INVESTMENTS  41 

in  regard  to  the  future,  no  one  would  think  of  using  that  word 
in  such  a  connection. 

The  present  tendency  in  creating  mortgages  is  to  eliminate 
the  "  future  "  or  "  hereafter  acquired  "  clause,  as  it  may 
become  troublesome  when  companies  desire  new  property 
and  must  raise  additional  funds  for  the  purpose.  To  be  pro- 
hibited from  so  doing  on  account  of  being  obliged  to  place 
new  property  under  an  existing  mortgage,  may  be  a  hardship. 
It  is  often  possible  to  get  around  this  restriction,  however, 
in  many  ways;  as  by  the  issue  of  a  "  purchase  money  mort- 
gage "  or  an  issue  of  bonds  by  a  separate  corporation,  guar- 
anteed by  the  parent  company. 

Blank  Indorsement.    See  "  Indorsement  in  Blank." 

Blind  Pool.  When  a  group  of  individuals,  firms,  or  corpora- 
tions place  their  interests  in  a  particular  matter  in  the  con- 
trol of  some  one  person  —  generally  one  of  the  group  —  for 
a  definite  time,  agreeing  that  that  one  shall  manage  their 
interests  without  any  instructions  from  the  others,  except 
as  set  forth  at  the  outset,  what  is  called  a  "  blind  pool  "  is 
formed.  The  members  may,  by  the  term  of  agreement,  not 
even  be  allowed  any  information  from  the  one  in  control 
during  the  life  of  the  pool,  unless  the  object  for  which  it  was 
formed  shall  have  been  sooner  accomplished. 

Sometimes  the  term  "  blind  pool  "  is  given  to  a  corporation 
whose  operations  are  completely  shielded  from  the  knowledge 
of  its  stockholders  or  the  public,  only  those  actually  in  the 
management  or  closely  associated  with  the  same,  having  any 
knowledge  of  the  company's  financial  condition  and  earning 
ability. 

Block.  A  "  block  of  stock  "  or  a  "  block  of  bonds  "  means 
a  considerable  amount  of  such  security  bought  or  sold  in  one 
transaction.  The  sale  of  5,000  shares  of  stock  at  one  time 
would  be  considered  as  a  "  block."  Sometimes,  when  the 
securities  of  a  corporation  are  offered  for  public  sale  or  sub- 
scription, a  certain  amount  of  stock  is  required  to  be  purchased 
with  a  given  amount  of  bonds;  these  combinations  of  securi- 
ties are  known  as  "  blocks." 

Blotter.  Commonly  called  a  book  of  original  entry.  A 
book  in  which  a  first  and  temporary  record  of  transactions 
are  made,  later  to  be  transferred  —  "  posted  "  —  into  books 
of  more  permanent  record. 

Bnk.     Bank. 

Board.  "  On  the  board,"  meaning  on  the  exchange.  (Also 
see  "  Board  Room.") 

Board  Man.  A  broker,  being  a  member  of  some  exchange, 
who  goes  upon  the  floor  of  such  an  exchange  and  transacts 
business.  Such  a  man  may  buy  and  sell  for  his  own  firm  or 


42  MONEY    AND    INVESTMENTS 

for  some  other;  that  is,  a  firm  need  not  necessarily  send 
upon  the  floor  of  an  exchange  some  one  of  its  members  pos- 
sessing a  seat  thereon,  but  may  employ,  at  fixed  rates  of 
commission  (see  "  Two-dollar  Man  "),  some  other  member 
of  the  exchange  to  act  in  its  stead.  In  any  event,  the  one 
actually  doing  the  business  upon  the  exchange  itself  is  called 
the  "  board  man." 

Board  of  Education.  For  school  purposes,  a  separate 
municipality  is  often  created  with  its  own  officers  and  terri- 
torial lines.  Such  geographical  divisions  are  often  called 
"  School  Districts."  This  custom  is  very  common  in  the 
middle  and  far  West,  and  "  Board  of  Education  "  and  "  School 
District  "  bonds  are  those  issued  by  such  municipalities. 
The  name  "  School  District  "  is  more  commonly  applied  in 
certain  sections  of  the  West  where  the  cities  are  subdivided 
into  several  districts  and  the  same  method  of  subdivision 
is  extended  to  the  rural  sections;  whereas  the  title  "  Board 
of  Education  "  is  more  commonly  in  use  in  sections  where 
practically  the  entire  city  is  embraced  in  the  district. 

These  bonds  have,  as  a  rule,  proved  very  safe  investments. 
The  appropriation  of  money  for  the  education  of  children 
appeals  to  the  average  American,  which,  together  with  the 
fact  that  many  of  the  Western  States  have  received  financial 
aid  in  the  way  of  public  lands  for  school  purposes,  has  made 
a  sound  basis  for  the  establishment  of  good  credit. 

Board  of  Investment.     (See  "  Savings  Bank.") 

Board  of  Trade  of  the  City  of  Chicago.  A  commercial  ex- 
change organized  and  chartered  under  the  laws  of  Illinois 
to  promote  uniformity  in  the  customs  and  usages  of  mer- 
chants, and  acquire  and  disseminate  valuable  commercial 
and  economic  information.  It  is  a  place  wherein  such  com- 
modities as  grains,  seeds,  flour,  provisions,  etc.,  are  dealt  in. 
Inasmuch  as  Chicago  is  claimed  to  be  not  only  the  great  grain 
clearing-house  of  the  world,  but  also  the  largest  lumber 
market  in  the  world,  and  inasmuch  as  the  volume  and  value 
of  the  different  grain  crops  of  the  West  have  a  direct  bearing 
upon  the  transportation  rates  and  consequently  railroad 
earnings,  and  as  they  generally  fix  the  rate  of  interest  on 
money,  the  importance  of  the  "  Chicago  Board  of  Trade," 
and  of  the  information  which  is  distributed  broadcast  there- 
from, can  be  well  appreciated.  For  here  is  collected  all 
information  concerning  crops;  on  the  bulletin  of  the  Ex- 
change is  posted  the  price  of  wheat,  maize,  oats,  and  pro- 
visions in  all  the  principal  markets  of  the  world,  and  this 
information  is  spread  broadcast  for  the  benefit  of  both  pro- 
ducer and  consumer. 

One  obtains  membership  by  being  voted  in  by  the  Board 


MONEY    AND    INVESTMENTS  43 

of  Directors,  and  upon  the  payment  of  an  initiation  fee  of 
$10,000,  or  upon  the  presentation  of  an  unimpaired  and  un- 
forfeited  membership  duly  transferred,  and  by  signing  an 
agreement  to  abide  by  the  rules,  etc. 

In  all  trading  on  the  Exchange  actual  delivery  is  contem- 
plated by  tender  of  regular  "  warehouse  receipts  "  representing 
the  commodity  in  question  unless  otherwise  agreed  between 
buyer  and  seller.  The  regular  trading  hours  are  from  9.30  A.M. 
to  1.15  P.M.,  except  on  Saturdays,  when  12  M.  is  the  closing 
hour. 

To  insert  here  all  necessary  to  completely  cover  the  matter 
of  commissions  charged  by  the  Board  of  Trade  would  occupy 
too  much  space,  as  it  varies  on  each  commodity,  according  to 
amount  and  conditions  of  sale.  The  usual  trading  unit  in 
grain  is  5,000  bushels;  the  commission  is  £c.  per  bushel  for 
the  purchase  or  sale,  or  for  the  purchase  and  sale. 

There  is  a  clearing-house  maintained  for  the  convenience  of 
members,  conducted  in  a  similar  manner  to  a  "  stock  ex- 
change clearing-house." 

The  Chicago  Board  of  Trade  has  issued  a  very  voluminous 
book,  containing  not  only  all  the  rules  in  relation  to  trans- 
actions thereon,  but  an  enormous  amount  of  information, 
statistical  and  otherwise,  which  is  well  worth  the  perusal  on 
the  part  of  any  person  who  wishes  to  investigate  this  subject 
further. 

Board  Room.  A  room  in  a  broker's  office  where»customers 
may  obtain  quotations  of  sales  almost  immediately  after  the 
transactions  are  made  upon  the  various  exchanges.  "  Tick- 
ers "  are  installed  in  all  these  rooms,  but  the  method  of  dis- 
playing the  information  differs  in  various  firms.  In  some, 
the  customers  read  it  directly  from  the  "  tape;  "  in  others, 
a  boy  copies  the  quotations  as  fast  as  received  upon  large 
sheets  of  especially  ruled  paper,  with  columns  headed  with  the 
names  of  the  securities,  and,  in  others,  the  quotations  are 
displayed  upon  a  blackboard  similarly  arranged,  that  all  may 
see  from  the  various  parts  of  the  room.  From  the  latter 
custom  arises  the  name,  "  board  room." 

This  term  is  also  applied  to  the  trading  room  of  an  exchange. 

Boat  Loads.  A  Chicago  Board  of  Trade  term  which  refers 
to  canal  boats,  averaging  to  carry  about  8,000  bushels  of 
grain. 

Bob.     An  English  shilling  (24  3-10  cents). 

Bobtail  Pool.  (Read  first  part  of  "  Pool.")  A  "  pool  "  in 
which  the  members  buy  or  sell  independently  of  one  another, 
and  not  through  one  member. 

John  Moody  defines  it  as  an  informal  pool  in  stocks,  in 
which  the  members  join  together  to  move  the  stock  either  up 


44  MONEY    AND    INVESTMENTS 

or  down,  and  then  each  is  usually  allowed  to  suit  his  own 
pleasure  in  closing  out  his  interest. 

Bolivar.  The  monetary  unit  of  Venezuela,  being  equal  to 
the  French  "  franc,"  and  to  $.193  United  States  money.  This 
name  was  chosen  in  honour  of  the  hero  of  Venezuela. 

Boliviano.  The  monetary  unit  of  Bolivia,  silver,  and 
equal  —  at  this  time1  —  in  value  to  about  $.478  United 
States  money. 

Bonanza.  Any  lucky  strike  of  rich  ore  in  a  mine;  an  un- 
usually profitable  speculation  or  investment. 

Bond.2  An  instrument  by  which  a  government,  munici- 
pality, or  corporation  contracts  and  agrees  to  pay  a  specified 
sum  of  money  on  a  given  date  (sometimes  reserving  the  right 
for  earlier  payment),  the  bond  itself  being  a  coupon-bearing 
(or  registered)  note  under  seal;  the  coupons  representing 
the  quarterly,  semi-annual,  or  annual  interest,  as  the  case 
may  be,  at  a  fixed  rate.3  (See  "  Corporation  Bonds.") 

In  the  case  of  a  "  corporation  bond,"  a  mortgage  is  usually 
placed  upon  the  property  to  secure  the  issue.  In  the  case  of 
the  government  or  municipality,  no  mortgage  is  necessary, 
although  sometimes  certain  revenues  are  pledged  for  payment 
of  the  principal,  or  interest,  or  both.  The  government  or 
municipality,  as  a  rule,  simply  issues  its  promise  to  pay  under 
seal  in  the  form  of  a  "  bond  "  as  already  described. 

"  Bonds  "  are  issued  by  corporations,  when  sufficient  money 
for  the  capital  of  same  cannot  be  raised  by  the  issuing  of 
stock  at  satisfactory  prices,  or  when,  perhaps,  the  limit  of 
stock  which  can  be  issued  legally  has  been  reached,  and  ad- 
ditional money  is  required.  Again,  suppose  a  corporation  is 
enjoying  very  good  profits,  earning  and  paying,  for  example, 
10%  dividends  upon  its  stock;  it  needs  money  for  additions 
and  extensions;  to  issue  more  stock  would  be  equivalent  to 
borrowing  money  at  the  high  rate  of  interest  of  10%,  for  that 

1  United  States  Treasury  Department  Circular  issued  April  1,  1906. 

2  Two  men  of  finance  once  made  the  attempt  to  define  a  "  bond  "  in  the 
fewest  possible  words  with  this  result:  First,  "  Promise  to  pay  under  seal." 
Second,  "  Chosen  action  under  seal."     The  writer  offers  these  for  con- 
sideration. 

3  Cleveland,  in  his  "  Funds  and  Their  Uses,"  distinguishes  between  a 
bond  and  an  ordinary  promissory  note  in  this  way:    "  The  only  way  that 
a  bond  is  distinguished  from  an  ordinary  promissory  note  is  by  the  fact 
that  it  is  issued  as  a  part  of  a  series  of  like  tenor  and  amount,  and,  in  most 
cases,  under  a  common  security.    By  rule  of  common  law  the  bond  is  also 
more  formal  in  its  execution.    The  note  is  a  simple  promise  (in  any  form, 
so  long  as  a  definite  promise  for  the  payment  of  money  appears  upon  its 
face),  signed  by  the  party  bound,  without  any  formality  as  to  witnesses  or 
seal.    The  bond,  on  the  other  hand,  in  its  old  common-law  form,  required 
a  seal,  and  had  to  be  witnessed  in  the  same  manner  as  a  deed  or  other 
formal  conveyance  of  property,  and  though  assignable  was  not  negotiable. 
This  is  still  the  rule  within  many  jurisdictions." 


MONEY    AND    INVESTMENTS  45 

is  what  the  stock  issue  already  outstanding  is  returning  to 
its  owners.  The  company  finds  it  is  possible  to  sell  bonds 
bearing  5%  interest  to  raise  the  needed  capital.  It  is  ex- 
pected that  the  increased  capital  will  return  earnings  to  the 
corporation  not  less  than  that  already  invested;  viz.  10%. 
Consequently,  by  the  sale  of  bonds  bearing  5%  interest,  the 
difference  between  that  and  the  expected  earning  capacity 
of  the  new  capital,  or  another  5%,  would  accrue  to  the  benefit 
of  the  stock  already  outstanding,  and  increase,  therefore, 
the  rate  of  dividends  upon  that  stock. 

Bonded  Debt.  The  fixed  indebtedness  of  a  municipality  or 
incorporated  company  in  the  form  of  bonds.  (See  "  Bond.") 

The  question  of  the  amount  of  bonded  indebtedness  fair 
to  place  upon  property,  fair  to  both  the  shareholders  and 
bondholders,  is  a  question  deserving  of  much  serious  con- 
sideration. There  is  a  general  belief  that  the  property  of  a 
corporation  should  only  be  mortgaged  to  the  extent  of  its 
unchangeable  value;  that  is,  the  minimum  value  of  such 
property,  as  generally  recognized,  in  a  time  of  public  ad- 
versity. Mortgaging  a  property  to  this  extent  would  leave 
the  shareholders  to  take  the  risk  of  the  fluctuating  value,  and 
it  is  proper  that  they  should  do  so,  for,  as  a  rule,  the  bonds  on  a 
property  are  expected  to  pay  a  lesser  rate  of  interest  than 
the  dividend  return  to  the  shareholders.  It  is  impossible  to 
give  any  set  rules  here:  each  case  will  have  to  be  judged  upon 
its  own  merits.  The  amount  of  sinking  fund  must  be  taken 
into  consideration,  also  the  kind  of  property  mortgaged. 
For  instance,  some  properties  depreciate  through  wear  and 
tear  much  faster  than  others  —  street  railways,  for  instance, 
more  rapidly  than  electric  light  or  gas  plants.  (This  subject 
will  be  found  more  fully  treated  under  the  heading  "  Sinking 
Fund.") 

In  the  case  of  municipal  bonded  indebtedness,  a  very 
prominent  lawyer  once  made  the  statement  that  no  munici- 
pality could  ever  stand  a  greater  "  net  indebtedness  "  than 
5%  of  its  assessed  valuation,  and  that  is  a  very  good  rule  to 
follow,  but,  like  all  good  rules,  it  has  its  glaring  exceptions; 
for  instance,  the  assessed  valuations  of  some  Far  West  and 
Middle  West  communities  are  very  much  less,  in  proportion 
to  the  marketable  value  of  the  property,  than  here  in  the 
East  (This  is  more  fully  set  forth  under  the  heading  "  As- 
sessed Valuation  "),  and,  in  such  cases,  a  greater  net  indebted- 
ness than  5%  might  be  fully  justified. 

Another  thing  to  be  considered  is  not  to  be  influenced  too 
much  by  the  offer  of  a  new  issue  at  a  figure  below  the  par 
value  —  that  is,  at  a  discount.  If  a  railway  corporation  sells 
an  issue  of  bonds  having  20  years  to  run,  bearing  5%  interest, 
and  receives  but  80  cents  on  a  dollar  for  the  same,  the  pur- 


46  MONEY    AND    INVESTMENTS 

chaser  is  prone  to  believe  that  the  net  earnings  need  to 
provide  for  only  5%  on  the  bond  issue,  but  when  these  bonds 
mature,  20  years  afterwards,  they  must  be  paid  off  at  par, 
or  20%  in  excess  of  the  original  selling  price.  This  20%  must 
come  from  some  source,  and,  therefore,  it  would  be  better 
for  the  purchaser  to  spread  this  20%  over  the  time  which  the 
bonds  have  to  run,  estimating  the  issue  roughly,  bearing,  say, 
a  6%  rather  than  a  5%  rate;  then,  judge  whether,  or  not, 
the  corporation  can  stand  such  an  interest  charge.  On  the 
whole,  it  is  better  financiering  for  a  corporation  to  issue  its 
bonds  at  a  rate  of  interest  which  will  warrant  their  sale  in 
the  close  proximity  to  par. 

Bond  for  a  Deed.  An  instrument  which  the  seller  of  land 
gives  to  the  one  wishing  to  purchase  it,  and  which  binds  the 
former  to  convey  the  title  upon  receiving  price  agreed  upon. 

Bond  of  Indemnity.  In  investment  matters  the  common 
use  of  the  "  bond  of  indemnity  "  is  in  case  of  a  lost  security. 
It  is  a  form  of  guaranty  protecting  a  corporation  (firm  or 
individual)  in  event  of  presentation  at  some  future  time  of  a 
security  which  had  been  lost  by  the  owner  and  the  corpora- 
tion issuing  the  same  had  issued  a  new  security  in  its  stead. 
The  usual  way  of  obtaining  such  a  "  bond  of  indemnity  "  is 
to  apply  to  some  "  guaranty  and  indemnity  company " 
which  makes  a  business  of  furnishing  such  bonds  upon 
satisfactory  evidence  that  the  security  has  been  lost  or 
destroyed.  For  this  bond,  which  is  really  a  form  of  insurance, 
a  reasonable  charge  is  made. 

A  "  bond  of  indemnity  "  has  many  uses  to  secure  one 
against  loss  in  money  matters,  but  one  of  the  most  common 
is  as  a  protection  for  the  employer  against  loss  resulting  from 
the  handling  of  funds,  securities,  etc.,  by  an  employee;  as 
the  cashier  or  treasurer  of  a  bank.  Such  a  bond  may  be 
obtained  by  an  executor  or  administrator  of  an  estate  when 
required  by  law. 

All  "  bonds  of  indemnity  "  used  formerly  to  be  obtained 
by  getting  one  or  more  private  individuals  to  "  go  on  his 
bond."  This  was  almost  always  done  as  a  distinct  favour  on 
the  part  of  the  signer,  and  generally  against  his  better  judg- 
ment; he  receiving  no  pecuniary  return  for  his  risk,  as  a  rule. 
It  gradually  became  more  and  more  difficult  to  get  such 
bonds,  and,  naturally,  the  "  insurance  "  feature  entered  into 
it,  and  properly  organized  companies  have  taken  over  most 
of  this  work. 

Bond  Reserve.  In  recent  years,  banks  in  this  country  have 
adopted  the  practice  of  investing  some  portion  of  their  funds 
in  bonds,  which  are  supposed  to  be  quickly  convertible  into 
cash  in  case  of  necessity.  This  is  a  safeguard,  and  an  invest- 


MONEY    AND    INVESTMENTS  47 

ment  of  this  kind  by  a  banking  institution  is  often  known 
by  the  above  title. 

In  his  recent  investigation  of  bond  holdings  by  banks, 
Wm.  C.  Cornwell  ascertained  that  banks  in  the  United  States 
containing  $10,458,000,000  of  deposits,  held  $1,771,000,000 
of  bonds,  not  including  United  States  bonds.  Therefore 
19.94%  of  the  total  deposits  were  held  in  bonds. 

Bond  (payable)  to  Bearer.  Either  an  ordinary  coupon  bond, 
or  a  registered  (registered  as  to  principal  only  and  with 
coupons)  bond  which  has  been  so  registered  that  it  is  good 
in  the  hands  of  the  bearer  and  may  pass  from  hand  to  hand 
without  transfer  upon  the  registration  books. 

Bond  Values  Tables.  It  is  expected  that  the  reader  has  first 
familiarized  himself  with  the  matter  under  "  Net  Return 
upon  the  Investment." 

As  there  suggested,  tables  of  bond  values  are  used  to  com- 
pute this  "  net  return."  The  writer  has  many  times  been 
asked  the  principle  on  which  the  computation  of  these  tables 
is  based,  and  surprise  is  often  expressed  upon  finding  that  a 
mere  calculation  by  simple  arithmetic  does  not  give  the  same 
results  as  are  to  be  found  in  the  ordinary  tables  in  use.  These 
people  have  proceeded  to  take,  as  an  illustration,  a  bond 
bearing  6%  interest,  maturing  in  ten  years,  for  which  they 
had  paid  110.  They  immediately  divide  the  amount  of 
premium  —  i.  e.  10%  —  by  the  length  of  time  the  bond  has 
to  run  —  in  this  case,  ten  years  —  and  obtain  1  as  the  result, 
which  they  deduct  from  6%,  and  assume,  therefore,  that  the 
"  net  return  "  to  them  upon  the  investment  is  5%.  Ten  per 
cent,  premium  being  charged  off  at  the  rate  of  1%  per  annum. 

The  failure  in  this  reasoning  arises  from  the  fact  that  tables 
of  bond  values  are  based  upon  the  fundamental  principle  that 
the  holder  of  a  bond  is  expected,  at  the  maturity  of  each  one 
of  the  coupons,  to  re-invest  a  sufficient  portion  of  the  interest 
money  received,  and  keep  it  so  invested  until  the  maturity 
of  the  bond,  so  that  the  face  value  of  the  bond  added  to  the 
accumulation  of  re-invested  interest,  will,  at  its  maturity,  be 
exactly  equivalent  to  the  original  cost  of  the  same. 

Right  here  is  where  the  authors  of  such  tables  diverge  and 
form  two  separate  schools,  so  to  speak.  The  first  assumes  that 
the  rate  of  interest  at  which  the  money  set  side  from  the 
maturing  coupons  shall  be  compounded  is  the  same  as  the 
computed  net  return  upon  the  investment.  That  is  to  say, 
if  a  bond  is  sold  at  such  a  premium  as  to  net  the  investor 
6%,  it  is  assumed  that  the  portion  re-invested  shall  be  com- 
pounded at  6%  without  regard  to  the  average  rate  of  interest 
that  will  probably  prevail  during  the  life  of  the  bond.  Sup- 
pose, for  example,  an  investor  in  bonds  may  have  one  lot 


48  MONEY    AND    INVESTMENTS 

netting  him  6%  per  annum  and  another  lot  netting  him  4% 
per  annum.  The  assumption  arises  that  a  certain  portion 
of  the  interest  payments,  even  although  they  may  happen 
to  fall  due  upon  the  same  day,  shall  be  re-invested  at  com- 
pound interest  at  6%  and  4%  respectively.  It  seems  absurd 
to  assume  that  those  two  separate  rates  of  interest  will  be 
prevailing  at  the  same  time  for  a  similar  grade  of  securities, 
or  that  there  is  any  possibility  that  a  holder  of  bonds  will  in 
any  way  guide  himself  in  the  re-investment  with  any  con- 
sideration of  the  "  net  return  "  existing  upon  the  bonds  in 
question. 

The  second  school,  which  is  undoubtedly  the  correct  one, 
but  which  principle  has  never  been  generally  adopted,  assumes 
the  rate  for  re-investment  of  the  interest  as  fixed  at  some 
definite  per  cent.,  say  4,  with  entire  disregard  of  the  "  net 
return  "  upon  the  original  investment.  It  will  be  seen  at  a 
glance  that  it  is  much  fairer  to  predict  the  future  investment 
of  money  at  an  average  rate  of,  perhaps,  4%,  than  in  such 
widely  diverging  rates  as  in  the  first  plan. 

Bonus.  In  matters  financial  this  has  several  uses.  It  may 
be  a  premium  given  for  a  loan,  for  a  charter  or  other  privilege 
granted  a  corporation;  it  may  be  an  extra  dividend  to  share- 
holders, or  may  be  stock  thrown  in  with  the  sale  of  bonds  or 
other  stock,  and  in  this  last  use  perhaps  it  is  most  common. 
An  illustration  would  be:  A  banker  offers  a  client,  say,  $10,000 
bonds  of  a  certain  railway  or  other  corporation,  which  bonds 
in  themselves  might  not  be  very  attractive  to  the  investor; 
in  order,  therefore,  to  accomplish  the  sale  of  the  same  with 
greater  ease,  the  banker  gives,  or  throws  in,  as  a  "  bonus  " 
a  certain  amount  of  stock,  probably  of  the  same  corporation. 

Another  use  is  in  the  case  of  a  holder  of  a  mortgage  or  a 
note  that  may  not  be  due  for  some  time,  and  on  which  the 
maker  desires  to  anticipate  payment.  The  holder  may  con- 
sider it  a  good  investment  and  not  wish  to  give  it  up  unless 
he  is  given  some  extra  consideration  for  so  doing.  Such  a 
consideration  would  be  called  a  "  bonus." 

Bonus  Bonds.  Bonds  issued  by  a  municipality  to  encourage 
the  building  of  a  railroad  or  some  manufacturing  industry, 
for  more  information  regarding  which,  turn  to  "  Railroad  Aid 
Bonds."  They  are  not  considered  a  desirable  investment. 

Books.  The  various  books,  such  as  ledger,  journal,  etc., 
in  which  the  accounts  of  an  individual,  firm,  or  corporation 
are  entered. 

Books  Close.  In  order  that  corporations,  especially  the 
larger  ones,  may  pay  a  dividend,  it  is  necessary  to  fix  an 
interval  of  one  or  more  day's  duration,  during  which  it  is 
possible  to  make  a  correct  list  of  the  stockholders  as  shown 


MONEY    AND    INVESTMENTS  49 

by  the  transfer  books,  so  that  the  dividends  may  be  sent  to 
the  stockholders  as  of  record  the  date  provided  for  in  the  vote 
passed  declaring  the  dividend.  It  is  desirable  that  no  stock 
shall  be  transferred  during  this  process,  and  it  is,  therefore, 
customary  for  each  corporation  to  "  close  its  books;  "  that  is, 
its  transfer  books,  during  such  an  interval.  This  period 
generally  precedes  shortly  the  actual  payment  of  dividend. 
Many  corporations  are  accustomed  to  give  ample  notice  to 
stockholders  either  by  mail  or  by  advertising,  stating  the 
dates  of  closing  and  opening  of  the  books.  Books  may  be 
closed  for  other  than  the  above  reason. 

The  New  York  Stock  Exchange  rules  provide  that  on  the 
day  of  the  closing  of  the  transfer  books  of  a  corporation  for 
a  dividend  upon  these  shares,  all  transactions  therein  for  cash 
shall  be  "  dividend  on  "  up  to  the  time  officially  designated 
by  the  closing  for  transfers.  All  transactions  on  that  day 
may  be  made  therein  for  "  cash  "  —  deliverable  the  same  day 
rather  than  on  the  following  day  as  is  the  usual  custom  — 
in  order  that  the  dividend  due  may  be  obtained  by  the  buyer. 
All  transactions  on  that  day,  other  than  for  "  cash,"  shall  be 
"  ex-dividend."  Should  the  closing  for  transfers  occur  upon 
a  holiday  or  half  holiday  observed  by  the  exchange,  transac- 
tions on  the  preceding  business  day  other  than  for  "  cash  " 
shall  be  "  ex-dividend."  The  buyer  of  any  shares  during  the 
period  for  which  the  transfer  books  may  be  closed  shall  be 
entitled  to  receive  all  interest,  dividends,  rights,  and  privileges, 
except  voting  power,  which  may  pertain  to  the  same  during 
the  period. 

After  the  closing  of  the  books  the  delivery  on  purchases 
of  "  odd  lots  "  of  stocks  cannot  be  made  until  the  books 
open. 

In  a  case  where  personal  liability  is  attached  to  a  certificate, 
the  seller  shall  have  the  right  to  make  delivery  by  transfer. 
The  right  to  require  receipt  or  delivery  by  transfer  shall  not 
obtain  while  the  transfer  books  are  closed.  (See  "  Transfer 
in  Blank.") 

Books  Open.  (See  "  Books  Close.")  Transfers  of  stocks 
may  again  be  made. 

Book  Value.  The  worth  of  any  business  or  corporation,  as 
shown  by  its  own  books.  Suppose  a  corporation  of  $100,000 
capital  stock,  par  value  $100,  shows,  by  its  books,  profits 
which  have  not  been  divided,  of  $50,000.  Taking  for  granted 
that  the  books  honestly  represent  the  facts,  then  there  is  one 
half,  or  50%,  as  much  profit  as  capital;  therefore,  adding 
the  50%  to  the  $100,  par  value  of  the  stock,  the  "  book  value  " 
would  be  $150  per  share. 

Boom.    An  enormous  advance  in  prices;   everything  going 


50  MONEY    AND    INVESTMENTS 

upward  midst  tremendous  enthusiasm,  until  unreasonable 
and  unnatural  levels  are  reached. 

Boomers.  Those  endeavouring  to  create  a  "  boom,"  or 
instrumental  in  causing  one. 

Boot.    See  "  To  Boot." 

Borrowing  Stock.  A  broker  (or  any  one)  borrows  stock 
when  he  has  made  a  contract  to  deliver,  and  the  stock  which 
he  has  sold,  for  any  one  of  various  reasons  —  such  as  having 
sold  it  "  short  "  —  cannot  be  delivered  at  the  time  agreed. 
The  usual  method  of  borrowing  among  stock  exchange 
brokers  is  as  follows: 

Sharp  &  Co.  sell  1,000  shares  of  Western  Union  Telegraph 
Co.  stock  at  90;  delivery  to  be  made  the  following  day. 
The  customer  for  whom  they  have  made  the  sale  cannot  deliver 
it  for  some  little  time,  possibly  he  has  sold  it  "  short."  (See 
"  Selling  Short.")  Sharp  &  Co.  ascertain  that  Brown  &  Co. 
have  1,000  shares  of  the  same  stock,  which  they  are  carrying 
for  a  customer;  they  are  borrowing  upon  this  stock  at  a  bank 
at  the  rate  of,  say,  $70  a  share,  which  is  all  the  bank  wishes  to 
loan  upon  the  stock,  at  the  reigning  price  of  $90.  In  loaning 
the  stock  to  Sharp  &  Co.,  Brown  &  Co.  would  receive  $90  a 
share,  which  would,  therefore,  be  equivalent  to  borrowing 
$20  a  share  more  upon  the  stock  than  they  could  in  any  other 
way;  giving  Brown  &  Co.  that  much  more  available  cash  in 
their  business  and  for  that  reason  they  are  willing  to  loan  the 
stock.  The  latter  must  pay  Sharp  &  Co.  interest  on  the 
money,  which  usually  is  a  little  more  favourable  to  them  than 
the  ruling  market  price.  This  is  called  the  "  loaning  rate  on 
stocks."  The  loaning  rate  varies  greatly  for  any  given  stock 
with  the  demand  to  borrow  it.  Sometimes  no  interest  is 
paid  (the  rate  is  quoted  "  flat  ")  on  account  of  a  great  de- 
mand; and  again  the  call  to  borrow  a  certain  stock  may  be 
so  great  as  to  cause  not  only  the  elimination  of  the  question 
of  interest,  but  the  lender  may  be  able  to  exact  a  premium 
from  the  borrower.  This  premium  is  expressed  in  percentage 
as  1-32%  (per  day).  The  lender  of  a  stock  is  entitled  to  all 
dividends  declared  upon  it  during  the  time  of  the  loan. 

Sharp  &  Co.  would  be  obliged,  each  day,  if  there  were  any 
change  in  the  quotations  of  Western  Union  stock,  to  adjust 
the  difference  with  Brown  &  Co.;  that  is,  we  will  suppose  that 
Western  Union  stock,  on  the  day  after  the  loan  is  made  to 
Sharp  &  Co.,  advances  to  95;  Sharp  &  Co.  would  be  obliged 
to  pay  Brown  &  Co.  $5  a  share  more  on  the  stock;  perhaps, 
however,  it  declined  to  88.  In  that  event  Brown  &  Co.  would 
have  to  pay  $2  per  share  to  Sharp  &  Co.  In  other  words, 
the  difference  between  the  two  firms  must  always  be  adjusted 
in  accordance  with  the  price  ruling.  This  protects  the  original 


MONEY    AND    INVESTMENTS  51 

lender  of  the  stock  and  enables  him  to  buy  the  stock  in,  if 
necessary,  at  any  time,  without  loss,  and  does  not  make  him 
dependent  upon  Sharp  &  Co.'s  ability  to  deliver  the  stock  in 
case  called  upon  so  to  do  by  the  lender. 

Boston  and  Montana.  Boston  and  Montana  Consolidated 
Copper  &  Silver  Mining  Co.  (Controlled  by  Amalgamated 
Copper  Co.) 

Boston  Consolidated.  Boston  Consolidated  Copper  and  Gold 
Mining  Co.,  Limited. 

Boston  Method  of  Figuring  Interest.    See  "  Interest." 

Boston  Shilling.     See  "  Pine  Tree  Money." 

Bottom.  "  The  bottom  has  been  reached;  "  meaning  that 
prices  will  not  go  lower,  or  that  depressed  business  conditions 
have  reached  their  lowest  ebb,  and,  in  either  case,  an  upward 
tendency  is  next  expected. 

Bottom  Has  Dropped  Out  of.  If  the  bottom  drops  out  of  a 
pail  of  milk,  it  is  about  as  bad  a  catastrophe  as  could  happen 
to  the  milk.  When  the  "  bottom  drops  out  of  the  market," 
a  similar  idea  is  conveyed  regarding  prices;  namely,  that  they 
have  gone  downward  in  about  as  bad  a  way  as  it  is  possible 
to  conceive,  and  that  everything  has  a  very  discouraging 
appearance. 

Bottom  Prices.  The  lowest  prices.  The  expression  "  he 
got  in  at  the  bottom  "  means  that  nobody  obtained  the 
security  at  a  less  price  than  the  person  referred  to. 

Bottomry.  A  loan  which  has  a  vessel  pledged  as  security 
for  its  payment. 

Bottomry  Bond.  The  contract  given  securing  of  a  vessel  to 
the  lender  as  a  pledge  for  the  payment  of  the  loan.  (See 
"  Bottomry.") 

Bourse.1  The  name  applied  to  stock  exchanges  in  Continen- 
tal Europe.  The  Paris  Bourse  was  founded  in  1726. 

B.  Q.    Chicago,  Burlington  &  Quincy  R.  R.  Co. 

Bradstreet's.     See  "  Commercial  Agencies." 

Brassage.  (Read  "  Seigniorage.")  "  Brassage  "  differs 
from  "  seigniorage  "  in  the  latter  indicating  the  difference 
between  the  commercial  value  of  the  metal  in  the  coin,  and 
its  face  value,  while  "  brassage  "  is  a  charge  made  for  coining 
bullion,  usually  based  upon  the  approximate  cost  of  ac- 
complishing the  same. 

Break.  "  Break  in  the  market:  "  a  sudden  and  considerable 
decline  in  prices. 

1  Generally  speaking,  in  Continental  Europe,  a  "  bourse  "  may  mean  a 
market  for  the  sale  of  securities  or  a  market  for  the  sale  of  specific  kind  of 
merchandise,  such  as  grains,  cotton,  etc. 


52  MONEY    AND    INVESTMENTS 

Break  Even.  To  close  a  transaction  with  neither  profit  nor 
loss;  to  come  out  just  even. 

British  Columbia.  The  British  Columbia  Copper  Co., 
Limited. 

Broken  Lot.  Same  as  "  odd  lot  "  in  reference  to  stocks,  and 
less  than  $10,000,  par  value,  in  bonds. 

Broker.  One  who  makes  purchases  and  sales  for  others  — 
his  principals  —  acts  as  a  middleman,  receiving  a  fixed  fee 
called  "brokerage"  (see  next  subject;  also  "Jobber")  for 
his  services.  Although  many  consider  a  "  broker  "  as  an 
"  agent,"  it  must  be  understood  that  there  is  a  distinction  be- 
tween the  two.  The  "  broker  "  endeavours  to  bring  together 
the  two  parties  to  the  transactions,  as,  for  instance,  the 
buyer  and  seller,  and  effect  an  agreement  between  them.  The 
best  illustration  would  be  in  the  case  of  an  insurance  agent  and 
broker.  The  latter  is  authorized  to  act  by  one  or  more  com- 
panies, while  the  former  represents  no  company  in  particular, 
but  will  usually  obtain  insurance  with  the  company  where  he 
can  make  the  best  trade,  and  thus  acts  in  the  capacity  of 
bringing  the  insurer  and  insured  to  an  agreement.1  Brokers 
are  of  many  kinds:  stock,  grain,  cotton,  oil,  real  estate,  and 
so  on. 

Brokerage.  Practically  the  same  as  "  commission,"  but 
used  to  denote  the  fee  charged  by  any  kind  of  a  "  broker." 
If  you  sell  a  hundred  shares  of  some  stock  through  a  stock 
broker,  he  will  charge  you  a  certain  percentage,  say  £%;  that 
is,  12£  cents  for  each  share,  or  a  total  for  the  hundred  shares 
of  $12.50.  This  charge  is  called  "  brokerage." 

Broker's  Board.    Same  as  a  "  Stock  Exchange." 

Broker's  Note.  A  paper  given  in  writing  by  a  broker  to  the 
party  for  whom  he  is  acting,  setting  forth  the  terms  of  the 
purchase,  or  sale,  as  the  case  may  be. 

Brown  Brothers'  Virginia  Deferred  Certificates.  Since  West 
Virginia  was  set  aside  from  Virginia  as  a  separate  State,  it 
has  steadily  refused  to  accept  what  is  considered  its  just 
proportion  of  the  debt  of  the  original  State  of  Virginia.  A 
proposed  plan  of  settlement  has  been  issued  looking  toward 
an  adjustment  of  the  debt,  and  a  large  majority  of  the  holders 
of  the  original  certificates  have  deposited  their  evidences  of 
indebtedness  with  Messrs.  Brown  Brothers  &  Company  of 
New  York,  and  the  receipts  given  by  this  banking  house  to 
the  depositors  bear  the  title  of  Virginia  Debt  Certificates. 

B.  R.  T.     Brooklyn  Rapid  Transit  Co. 

"  B  "  Stock  (or  Shares).    See  "  Preferred  Shares  (or  Stock)." 

Bucketed.    When  an  order  has  gone  through  the  machinery 
1  "Essentials  of  Business  Law,"  Burdick. 


MONEY    AND    INVESTMENTS  53 

of  a  "  bucket  shop  "  and  been  accepted  by  the  same,  theoret- 
ically executed,  it  has  been  "  bucketed."  No  actual  purchase 
or  sale  takes  place,  the  broker  must  pay  losses  if  the  customer 
has  guessed  the  right  way,  and  vice  versa  if  the  opposite. 

"  Bucketed  "  is  used  to  denote  the  handling  by  a  legitimate 
stock  exchange  broker  of  his  customer's  accounts  on  "  bucket 
shop  "  methods.  In  other  words,  he  takes  the  opposite  end  of 
the  bet  to  his  customer,  and  buys  if  his  customer  sells,  and 
sells  if  he  buys.  By  this  plan,  however,  securities  are  actually 
bought  and  sold,  to  that  extent  differing  from  a  real  "  bucket 
shop."  Such  practice  is  not  in  good  repute.1 

Bucket  Shops.2  (See  "  Margin,"  which  read  first.)  "  Bucket 
shops  "  are  run  by  irresponsible  brokers,  not  members  of  any 
stock  exchange,  and  who  do  a  marginal  business  upon  one 
dollar  a  share  and  upwards.3  As  a  matter  of  fact,  in  the  case 
of  a  "  bucket  shop,"  the  stock  itself  is  usually  not  purchased 

1  Inasmuch  as  legitimate  stock  exchange  brokers  have  been  known  to 
"  bucket  "  their  orders  —  accepting  the  customer's  loss  or  paying  him  the 
profit  upon  the  settlement  of  the  account  —  it  may  be  sometimes  desirable 
for  a  customer  to  know  as  to  whether  his  orders  are  actually  being  exe- 
cuted.   This  may  be  done  by  his  demanding  the  name  of  the  broker  on  the 
opposite  side  of  the  transaction;  that  is,  the  one  to  whom  his  security  has 
been  sold  or  from  whom  it  was  purchased.    The  rules  of  the  stock  exchange 
entitle  him  to  this  information. 

2  "  The  origin  of  the  term  '  bucket  shop  '  is  not  now  often  referred  to, 
and  there  may  be  some  people  who  do  not  know  what  it  is.     The  old- 
fashioned  stock  broker,  member  of  the  New  York  Stock  Exchange,  for 
instance,  would  not  take  an  order  to  buy  or  sell  less  than  an  even  hundred 
shares  of  stock  on  margin.    He  would  refuse  to  deal  in  odd  lots.    So  those 
people  whose  capital  did  not  admit  of  their  furnishing  the  necessary  margin 
to  trade  in  so  large  an  amount  were  shut  out  from  trading.    Thus  sprang 
up  a  class  of  '  brokers  '  not  members  of  the  exchange,  yet  calling  them- 
selves brokers,  who  made  a  practice  of  accepting  from  a  number  of  different 
customers  orders  for  odd  lots  until  the  total  amounted  to  a  hundred  or 
some  multiple  of  a  hundred  shares.     Then  they  would  give  joint  order 
as  one  to  some  regular  broker  for  execution,  putting  all  the  small  orders 
together  to  make  one  sufficiently  large,  as  the  staves  of  a  bucket  are  put 
together  to  make  the  bucket.    Hence  the  nickname  of  these  intermediate 
'  brokers '  or  jobbers  grew  to  be  '  bucket  shop  keepers.'     In  more  recent 
times  the  reputable  '  broken  lot '  brokers  organized  an  exchange  of  their 
own  for  the  direct  handling  of  these  small  trades,  and  the  term  '  bucket 
shop,'  accordingly,  possesses  a  present  significance  less  respectable  than 
that  of  its  origin."  —  Providence  Journal. 

3  The  Constitution  of  the  New  York  Stock  Exchange  prohibits  its  mem- 
bers having  any  connection  whatsoever  with  "  bucket  shops,"  and  treats 
upon  the  subject  as  follows: 

"  Any  member  of  this  Exchange  who  is  interested  in,  or  associated  in 
business  with,  or  whose  office  is  connected  directly  or  indirectly  by  wire 
or  other  method  or  contrivance  with,  any  organization,  firm,  or  individual 
engaged  in  the  business  of  dealing  in  differences  or  quotations  on  the 
fluctuations  in  the  market  price  of  any  commodity  or  security  without  a 
bona-fide  purchase  or  sale  of  said  commodity  or  security  in  a  regular 
market  or  Exchange,  shall  on  conviction  thereof  be  deemed  to  have  com- 
mitted an  act  or  acts  detrimental  to  the  interest  and  welfare  of  this  Ex- 
change." 


54  MONEY    AND    INVESTMENTS 

or  sold  for  the  customer.  If  the  order  is  actually  executed 
upon  a  bona  fida  exchange,  then  the  "  bucket  shop  "  puts 
in  a  contrary  order  for  a  like  amount.  For  example,  a 
"  bucket  shop  "  would  sell  an  amount  equivalent  to  the 
customer's  purchase,  or,  likewise,  purchase  an  equivalent 
amount  to  his  sale,  thus  in  no  event  carrying  stocks.  It 
amounts  to  the  customer  wagering  his  money  upon  a  given 
stock  either  going  up  or  down,  and  the  "  bucket  shop," 
accepting  his  wager,  gambles  the  other  way;  and,  in  the  long 
run,  they,  like  most  other  gambling  establishments,  come  out 
winners.  A  specific  example  would  be  for  a  person  having 
about  $10  to  go  into  a  place  and  buy,  say,  ten  shares  of  stock, 
with  the  anticipation  of  a  rise.  He  will  be  charged  the  buying 
and  selling  commission,  and  interest  on  the  account,  the  same 
as  in  a  legitimate  broker's  office,  although  no  stock  will  be 
actually  purchased  or  sold.  If  the  stock  goes  down  more 
than  his  dollar  margin,  unless  he  puts  up  more  money  to 
protect  himself,  he  will  be  sold  out  and  the  transaction  closed, 
and  he  will  have  incurred  a  loss.  If  it  goes  up  and  he  chooses 
to  sell,  he  will  be  paid  the  difference  between  the  buying  and 
selling  values  of  the  stock,  less  the  two  commissions,  and 
interest  on  the  account,  plus  his  dollar  per  share  originally 
deposited.  In  this  event  the  "  bucket  shop  "  is  the  loser  for 
the  amount  the  stock  has  advanced  less  the  two  commissions 
and  interest,  unless,  by  chance,  they  feared  that  the  stock 
might  advance  and  to  protect  themselves  had  actually  pur- 
chased. In  that  case  they,  in  turn,  would  have  had  to  pay  a 
commission  to  a  legitimate  broker.  Bear  in  mind  one  thing 
all  the  time;  that  the  quotations  of  the  legitimate  stock  ex- 
change are  followed  in  the  "  bucket  shops."  Stock  exchanges 
have  made  strenuous  efforts  to  prevent  the  installation  of 
"  tickers  "  in  concerns  of  this  kind,  for  if  it  were  not  possible 
for  these  establishments  to  get  the  stock  exchange  quotations, 
it  would  be  difficult  for  them  to  exist. 

The  curse  of  this  sort  of  business  is  that  it  attracts  men  and 
women  of  very  small  means,  often  office  boys  and  the  like. 
It  is  one  of  the  worst  forms  of  stock  gambling  known  and  has 
done  untold  injury.  The  majority  of  "  bucket  shops  "  will 
advertise  that  stock  can  be  actually  delivered,  but  as  nobody 
calls  for  delivery,  except  in  rare  cases,  they  can  afford  to 
purchase  the  stock  through  genuine  brokers  to  fill  the  demand 
of  such  rare  occasions. 

"  Bucket  shops  "  thrive  best  on  a  declining  market,  for  it 
is  natural  for  the  average  person  to  buy  stocks  in  anticipation 
of  their  advance  in  value;  or,  in  other  words,  the  majority 
of  customers  wager  that  stocks  will  go  up.  Therefore,  a  falling 
market  causes  the  "  bucket  shop  "  to  win  more  of  its  wagers 
than  a  rising  market. 


MONEY    AND    INVESTMENTS  55 

The  magnitude  and  power  of  this  unwholesome  business, 
centring  in  New  York,  is  emphasized  by  the  knowledge  that 
at  times  the  daily  transactions  are  almost  as  large  as  that 
reported  on  the  New  York  Exchange  itself.  The  impression 
is  growing  that  a  large  percentage  of  this  business  is  in  the 
control  of  a  few  unscrupulous  men  commanding  enormous 
financial  resources.  Under  their  management  the  tentacles 
of  this  business  are  reaching  out  over  the  country  in  the  shape 
of  branch  offices,  from  which  points  orders  are  received  at 
the  common  centre.  Suppose,  for  example,  one  of  these 
heavily  financially  backed  concerns  finds  that  it  has  "  orders 
to  buy  "  a  very  large  number  of  shares  of  a  given  stock. 
Technically,  they  are  "  short  "  of  that  stock.  It  is  perfectly 
feasible  for  them  to  go  into  the  market  and  offer  a  large 
block  of  the  same  stock  for  sale,  and  break  the  price  suffi- 
ciently to  wipe  out  all  the  margins  on  orders  in  hand.  Strata- 
gems of  this  kind  must  be  done  by  the  "  bucket  shop  " 
indirectly,  as  legitimate  stock  exchanges  do  not  coun- 
tenance members  accepting  orders  directly  from  "  bucket 
shops." 

Building  and  Loan  Associations.  A  form  of  bank  incor- 
porated under  the  laws  of  many  of  our  States  which  has 
experienced  a  rapid  growth.  They  are  to  encourage  the 
accumulation  of  money  on  the  part  of  those  of  limited  means, 
for  the  erection  of  buildings,  making  improvements  on  lands, 
payment  of  encumbrances  thereon,  and,  in  a  general  way, 
to  encourage  real  estate  investments  and  the  owning  of  homes 
and  the  saving  of  money.  One  joins  an  institution  of  this 
kind  by  becoming  a  subscriber  to  one  or  more  shares,  of  an 
ultimate  value  of  —  generally  —  $200;  that  is,  obliging  him- 
self to  pay  a  stated  sum  in  fixed  periodical  instalments,  say 
monthly;  upon  the  failing  so  to  do  he  must  suffer  certain 
prescribed  penalties.  He  agrees  to  make  these  payments 
until  the  shares  reach  the  stated  value,  when  they  become, 
as  it  were,  fully  paid;  his  proportion  of  the  earnings  of  the 
institution,  going  to  his  credit,  helps  bring  his  shares  to  the 
"  fully  paid  "  requirements.  A  shareholder  is  entitled  to 
borrow  money  upon  real  estate  from  the  "  association," 
when  it  has  any  on  hand  to  loan,  up  to  the  face  value 
of  the  shares  held.  Not  only  must  he  pay  the  legal  rate  of 
interest,  but  a  slight  premium  besides.  Formerly  the  loanable 
money  was  offered  to  the  shareholders  at  stated  intervals,  and 
awarded  each  time  to  the  best  bidder,  but  now  the  plan  of 
fixing  the  premium  has  been  more  generally  adopted.  Some 
of  the  "  associations  "  will  loan  to  members  upon  their  shares 
as  collateral,  up  to  a  certain  percentage  (say  90%)  of  the 
amount  paid  in. 

After  all  the  required   payments  have  been   made   upon 


56  MONEY    AND    INVESTMENTS 

shares,  a  subscriber    may    demand  a  return  of  his   money, 
plus  his  share  of  the  earnings  of  the  "  association." 

The  magnitude  of  the  money  invested  in  this  country  in 
institutions  such  as  above,  may  be  appreciated  from  the 
following  figures  furnished  by  the  Secretary  of  the  United 
League  of  Building  and  Loan  Associations:  Total  assets  — 
$600,342,586;  membership,  1,631,046;  these  returns  relating 
to  5,265  associations. 

There  are  various  institutions  such  as  Savings  Fund  and 
Loan  Associations,  Mutual  Loan  Associations,  Corporative 
Savings  and  Loan  Associations,  Homestead  Aid  Associations, 
Corporative  Banks,  etc.,  but  for  all  practical  purposes  their 
intents  and  aims  are  substantially  the  same  as  the  "  Building 
and  Loan  Associations." 

These  associations  are  divided  into  what  are  called  "  local  " 
and  "  national."  For  obvious  reasons  it  is  better  to  invest 
in  those  of  the  former  class. 

The  first  institution  of  this  kind  in  the  United  States  was 
at  Frankford,  Penn.,  in  1831,  although  in  England  these 
associations  have  been  traced  back  to  as  early  as  1789. 1 

Associations  of  this  type  have  proved  a  great  blessing  to  the 
wage  earners  of  this  country,  and  the  blessings  do  not  end 
there;  the  community  at  large  is  a  gainer  in  more  ways  than 
one.  It  is  conceivable  that  civil  strife  in  this  country  may  be 
restrained  from  the  very  fact  that  such  a  large  number  of 
people  of  limited  means  have  become  property  owners. 

Based  on  the  estimates  made  by  the  Department  of  Com- 
merce and  Labour,  it  is  fair  to  estimate  that  there  must  be 
in  the  vicinity  of  400,000  buildings  and  homes  which  have 
been  acquired  by  this  means.  In  the  local  associations  about 
70%  of  the  shareholders  are  working  people. 

Building  and  Mutual  Loan  Associations.  See  "  Building  and 
Loan  Associations." 

Building  Mortgage.    See  "  Mechanic's  Lien." 

Bulge.    A  small  but  sudden  advance  in  prices. 

Bull.  One  who  believes  that  conditions  are  ripe  for  an 
advance  in  prices,  or  one  who  desires  such  an  advance,  and 
talks  "  bullish  "  accordingly.  One  may  believe  that  the  price 
of  a  certain  security  is  about  to  advance,  and,  therefore,  is 
said  to  be  a  "  bull  "  on  that  particular  security,  whereas, 
he  may  not  necessarily  be  a  "  bull  "  on  others. 

One  writer  defines  a  "  bull  "  as  "  a  man  who  has  something 
to  sell  .  .  .  consequently  he  is  anxious  for  prices  to  go  up  " 
that  he  may  do  so  at  a  good  price. 

Bull  Clique.  Those  whose  interests  lie  in  the  direction  of  an 
advance  in  price  of  one  or  several  securities,  or  market  prices 

1  Department  of  Commerce  and  Labour,  Bulletin  No.  55. 


MONEY    AND    INVESTMENTS  57 

in  general,  and  who  unite  in  mutual  efforts  to  obtain  such  a 
result.  A  "  bull  clique  "  in  Union  Pacific,  for  instance,  is  a 
combination  formed  to  effect  an  advance  in  price  of  Union 
Pacific  Common  Stock.  (See  "  Clique.") 

Bulling  Prices  (or  the  Market).    Pushing  prices  upwards. 

Bullion.  Uncoined  gold  or  silver,  generally  in  the  form 
of  bars,  but  sometimes  in  lumps  or  other  masses.  Although 
the  uncoined  metal  is  usually  understood,  yet,  in  discussions 
relating  to  the  currency,  the  coined  metal  is  signified  as  well. 
For  export  purposes  the  former  is  generally  used. 

Bullion  Point.  This  is  occasionally  used  in  the  same  sense 
as  the  "  gold  import  point  "  or  the  "  gold  export  point." 

Bullion  Value.  The  commercial  value  of  the  precious  metals 
as  distinguished  from  the  face  value  of  coined  money.  If  a 
gold  five-dollar  piece  has  been  reduced  in  weight,  by  wear, 
so  as  to  contain  but  $4.75  worth  of  fine  gold,  the  latter  is  its 
"  bullion  value." 

Bull  Market.  (See  "  Bull.")  When  so  many  are  "  bulls," 
that  their  influence  is  predominant  in  the  market,  a  "  bull  " 
market  is  said  to  exist. 

Bull  Pool.  See  "  Bull  Clique."  The  difference  between  a 
"  pool  "  and  "  clique  "  is  explained  under  the  latter  subject. 

Bunco.    To  swindle  or  cheat. 

Buoyant.  Having  the  quality  of  rising.  When  the  market 
is  "  buoyant,"  it  is  rising  rapidly,  with  leaps  and  bounds; 
creating  much  enthusiasm  among  those  benefited  thereby. 

Burlington.    Chicago,  Burlington  &  Quincy  R.  R.  Co. 

Business  Is  Business.  Meaning  that  everything  is  fair  in 
business  and  that  its  conduct  shall  not  be  tried  by  the  moral 
code.  It  is  to  be  regretted  that  there  should  have  existed  a 
condition  giving  occasion  for  the  coining  of  this  phrase. 

Business  Paper.  Often  referred  to  as  "  business  receivables," 
or  "  trade  paper."  Notes,  acceptances,  etc.,  taken  in  the 
course  of  one's  business  in  exchange  for  goods  delivered, 
for  instance,  and  not  notes  given  in  exchange  for  money  with 
which  to  do  business.  If  West,  a  grocer,  sells  Clark  fifty  barrels 
of  flour  and  accepts  the  latter's  note  for  the  amount,  such  a 
note  is  "  business  paper."  If  West  had  borrowed  $10,000 
in  cash  from  Clark,  giving  Clark  his  note  therefor,  and 
West  wished  this  money  to  use  in  his  business,  such  a  note 
would  be  known  as  "  paper."  "  Paper  "  given  by  a  dry  goods 
house,  for  instance,  might  be  "  business  paper  "  or  "  mercan- 
tile paper,"  according  to  whether  it  was  given  by  the  dry 
goods  house  to  a  jobber  for  goods  purchased  of  him,  or  was 
given  in  the  form  of  a  note  in  direct  exchange  for  money 
borrowed  to  conduct  the  general  business  of  the  concern.  As 


58  MONEY    AND    INVESTMENTS 

a  matter  of  fact,  all  classes  of  notes,  acceptances,  bills  of 
exchange,  etc.,  irrespective  of  for  what  purpose  given,  are 
referred  to  as  "  commercial  paper  "  or,  more  briefly,  "  paper," 
and  the  minute  classification  given  above  is  not  always  ad- 
hered to  in  common  usage. 

The  foregoing  terms  used  to  designate  different  kinds  of 
"  promises  to  pay  "  arise  from  usage. 

Business  Receivables.    See  "  Business  Paper." 

Buy  at  the  Market.  An  order  to  buy  at  the  lowest  price 
at  which  the  security  can  be  obtained  without  any  price 
limit  being  set  by  the  one  giving  the  order. 

Buy  at  the  Opening.  An  order  to  purchase  immediately 
after  the  opening  of  the  stock  exchange  and  at  the  lowest 
price  possible. 

Buyer's  Option.  A  stock  exchange  term  for  a  contract  under 
the  terms  of  which  the  buyer  of  a  security  need  not  receive 
delivery  until  the  end  of  a  specified  time.  He  also  has  the 
right  to  demand  delivery  any  time  within  the  period  covered 
by  the  contract,  by  giving  one  day's  notice  to  the  seller. 
The  understanding  is  briefly  expressed  as  "  buyer  4,"  "  buyer 
10,"  the  figures  indicating  the  number  of  days  provided  for  in 
the  agreement.  By  the  New  York  Stock  Exchange  rules 
the  time  must  be  not  less  than  four  nor  more  than  sixty 
days. 

Buyer  the  Year.  This  is  explained  under  "  buyer's  option," 
except  that  one  year  is  the  time  allowed  the  purchaser  to  call 
for  delivery. 

Buyer  Three  (or  any  number).    See  "  Buyer's  Option." 

Buying  Back.    Same  thing  as  "  Short  Covering." 

Buying  Down.    See  "  Averaging  Down." 

Buying  In.  See  "  Short  Covering,"  meaning  the  same,  also 
buying  in  "  under  the  rule  "  (to  which  refer)  and  buying  to 
return  borrowed  stock. 

Buying  on  a  Scale.  Buying  at  regular  intervals  as  the  mar- 
ket changes.  Example:  A  certain  stock  at  100,  at  98,  at  96, 
and  so  on  at  every  decline  of  2%,  purchasing  a  stated  amount 
each  time. 

Buying  Order.  An  order  given  to  a  broker  to  buy  a  certain 
security,  either  with  or  without  limit  as  to  price  as  the  case 
may  be.  An  order  to  buy  is  good  for  the  date  for  which  it  is 
given  only  unless  otherwise  specified.  Sometimes  an  order  is 
given  "  good  until  countermanded,"  or  "  good  until  can- 
celled," by  which  the  broker  understands  there  is  no  definite 
limit  as  to  time;  but  brokers  usually  remind  their  customers 
at  frequent  intervals  regarding  the  orders  to  be  sure  that  they 
wish  them  to  still  remain  in  force. 


MONEY    AND    INVESTMENTS  59 

Buying  Outright.  An  absolute  purchase  for  which  full 
payment  is  made. 

Buying  Up.    See  "  Averaging  Up." 

B.  V.     These  letters  stand  for  "  book  value."     (See  that 
subject.) 

C.  When  printed  upon  the  "  tape,"  either    "  Class  C  " 
bonds,  "  coupon,"  or  "  cash  "  (if  preceded  by  a  sale)  is  under- 
stood. 

C 

Cable  Companies  —  Securities  of.  Since  the  laying  of  the 
first  submarine  cable  in  the  Atlantic  Ocean,  the  world  has 
now  been  girdled  with  them.  The  large  expense  contingent 
upon  their  laying,  repairing,  etc.,  has  been  considerably  re- 
duced, but  the  liability  to  breakage  and  the  consequent 
cessation  of  business  is  considerable.  The  ocean  bed  is  uneven, 
and  there  is  necessarily  a  considerable  wear  and  tear,  to  say 
nothing  of  the  dangers  of  ship  anchors  and  icebergs.  The 
repairing  of  a  break  has  been  much  simplified,  as  it  is  now 
scientifically  possible  to  calculate  with  great  accuracy  the 
location  of  the  break,  and,  by  the  aid  of  charts,  to  locate  and 
pick  up  the  two  ends.  Still,  there  is  an  element  of  risk  about 
cable  company  investments;  but,  nevertheless,  they  seem 
to  be  regarded  as  an  established  form  for  the  employment  of 
money. 

Cables.  Cablegrams  giving  quotations  in  foreign  markets. 
These  are  referred  to  as  "  private  cables,"  which  distinguishes 
those  received  by  private  firms,  or  individuals,  from  "  public 
cables,"  which  are  received  by  commercial  organizations. 

Cable  Transfers.  A  method  by  which  bankers  in  one 
country  give  their  customers  immediate  use  of  money  in  an- 
other. A  person  in  Boston  wishing  so  to  remit  a  sum  of  money 
to  a  person  in  London,  may  go  to  a  banker  dealing  in  "  foreign 
exchange  "  and  deposit  the  sum  desired,  together  with  an 
amount  sufficient  to  cover  certain  charges  and  expenses,  and 
the  banker  will  cable  his  agent  or  "  correspondent  "  in  Lon- 
don, authorizing  the  payment  of  the  sum  desired  to  the  Lon- 
doner, another  cable  message  being  sent  the  latter  advising 
him  where  he  may  call  to  get  the  money.  The  charge  made 
for  a  "  cable  transfer  "  depends  upon  the  "  rate  of  exchange," 
and  a  newspaper  quotation:  "  cable  transfers  4.87^  "  means 
that  for  every  "  pound  sterling  "  -  English  money  —  the 
Bostonian  wishes  to  pay  the  Londoner,  he  must  deposit 
$4.87^  U.  S.  money,  besides  the  expenses  of  cabling. 

Call.  A  demand  for  the  payment  of  money;  a  demand  for 
payments  (generally  in  installments)  of  subscriptions  to 


60  MONEY    AND    INVESTMENTS 

stocks  or  bonds;  an  assessment  for  which  one  is  legally  liable; 
a  notice  of  intention  to  prepay  a  bond  or  warrant. 

A  "  call  "  is  a  contract  which  gives  its  possessor  the  right 
to  demand,  from  the  party  signing  the  same,  a  certain  amount 
of  stock  (grain  or  other  commodity)  at  a  named  price  during 
the  time  stated  in  the  contract.  (In  London  the  privilege 
conveyed  in  a  "  call  "  can  only  be  exercised  on  the  last  day 
of  the  time  limit.  In  New  York  it  may  be  exercised  any  time 
within  its  life.)  The  party  willing  to  execute  such  a  contract, 
in  consideration  of  the  sum  received,  believes  that  the  security 
will  not  be  more  than  this  sum  above  the  price  named  in  the 
contract  during  its  life  (or  at  the  maturity  of  the  same),  thus 
making  it  no  object  for  the  owner  of  the  "  call  "  to  demand 
the  security. 

"  Calls  "  are  dealt  in  much  more  extensively  in  London 
than  in  America.  A  "  call  "  as  executed  in  New  York  may 
read  as  follows: 

"  For  value  received,  the  bearer  may  call  on  me  on  one  day's 
notice,  except  the  last  day,  when  notice  is  not  required,  100 
shares  of  the  capital  stock  of  the  Arctic  Electric  Co.  at  $175  per 
share  any  time  within  30  days  from  date." 

Then  follows  the  signature,  the  time  of  expiration,  and  an 
agreement  that  all  dividends  paid  upon  the  stock  in  the 
meantime  shall  accompany  the  stock  in  case  of  the  rights  of 
the  "  call  "  being  exerc'sed.  (See  also  "  Options.") 

The  word  "  call  "  is  also  used  in  reference  to  the  calling  off 
upon  produce  exchange,  "  futures  "  in  commodities,  or,  upon 
a  stock  exchange,  a  list  of  securities. 

Callable.  This  indicates  the  right  on  the  part  of  the  issuer 
of  a  security  to  pay  it  off  —  usually  under  certain  conditions  — 
previous  to  its  actual  date  of  maturity;  "  subject  to  call;  " 
"  subject  to  redemption." 

Called  Bonds.  Bonds  called  for  payment  or  redemption. 
In  many  issues  of  bonds  the  right  is  reserved  to  pay  off  all, 
or  a  certain  portion  of  the  issue,  under  conditions  and  at  such 
times  as  may  be  specified  in  the  bonds  and  deed  of  trust. 

Bonds  which  are  "  callable,"  that  is,  subject  to  this  right 
of  prepayment,  are  oftentimes  considered  undesirable,  owing 
to  the  fact  that  the  notice  of  a  bond  being  "  called  "  may  not 
reach  the  attention  of  the  holder,  and,  as  a  result,  he  may 
lose  interest  by  not  discovering  that  it  has  ceased  until  the 
time  of  presentation  of  the  next  coupon.  It  is  important, 
therefore,  that  the  holder  of  a  bond  subject  to  redemption 
previous  to  its  actual  maturity,  shall  be  conversant  with  the 
terms  under  which  such  bond  may  be  "  called,"  and  ascer- 
tain from  time  to  time  whether  or  not  the  "  call  "  has  actually 
been  issued.  It  is  proper  that  the  banking  house  selling  such 


MONEY    AND    INVESTMENTS  61 

a  bond  should  itself  keep  track  of  this  matter,  and  notify  its 
customer  in  case  of  a  "  call  "  being  issued  affecting  any  of  his 
securities,  and  many  bankers  try  conscientiously  to  do  this; 
but  in  spite  of  their  best  efforts  "  calls  "  are  apt  to  pass  un- 
noticed (and  if  so,  no  blame  should  be  placed  upon  them), 
so  it  is  wise  for  each  holder  to  protect  himself  in  this  regard. 

Call  Loan.    See  "  Demand  Loan." 

Call  Money.    See  "  Demand  Loan." 

Call  of  More.  As  no  one  unfamiliar  with  the  meaning  of 
"  call,"  or  "  put-and-call,"  would  be  likely  to  wish  an  under- 
standing of  "  call  of  more,"  it  seems  sufficient  to  quote  Mr. 
Higgins's  explanation  as  given  in  his  London  published  book, 
"  The  Put-and-Call,"  although  he  uses  rather  technical 
language: 

"  The  premium  paid  for  the  right  of  calling  or  putting  stock 
at  some  future  date,  at  a  stipulated  price,  is  sometimes  in- 
cluded in  the  price  at  which  a  transaction  is  done,  for  the 
same  date,  in  firm  stock.  Thus,  a  '  giver  '  of  option  money 
will  buy  a  certain  amount  of  stock  firm  for  delivery,  e.  g. 
two  months  ahead,  at  a  figure  sufficiently  over  the  current 
market  price  for  that  period  to  carry  with  it  the  option  of 
calling  a  like  amount  at  the  same  price.  This  transaction  in 
options  is  known  as  buying  stock  '  call  of  more.' 

"  The  '  put  of  more  '  is  the  same  kind  of  optional  trans- 
action, in  the  other  direction.  The  giver  sells  stock  to  the 
taker  under  the  market  price  with  the  privilege  of  being  able 
to  sell  him  another  like  quantity  of  the  stock  at  the  same  price 
at  the  end  of  the  option  period.  In  these  cases,  the  difference 
allowed  between  the  market  price  and  the  price  fixed  upon  is 
regulated  by  the  market  value  of  the  option  in  question  at 
the  time  of  dealing. 

"  A  stock  may  be  bought  call  o'  more  or  bought  put  o' 
more:  in  the  former  case  the  buyer  is  '  giving  option  money/ 
and  in  the  latter  he  is  '  taking  option  money.'  In  like  manner 
if  A  sells  to  B  stock  call  o'  more,  the  option  to  call  rests  with 
B,  and  A  is  '  taking  option  money.'  If  A  sells  stock  to  B 
put  o'  more,  he  is  giving  the  option  money  and  has  the  right 
to  put  on  B. 

"  The  price  given  for  the  firm  stock  may  carry  the  right  to 
buy  twice,  three  times,  or  any  number  of  times,  the  amount 
of  the  firm  stock  dealt  in;  the  options  being  termed  '  call  of 
twice  more,'  '  call  of  three  times  more,'  etc.,  or,  in  the  selling 
direction,  '  put  of  twice  more,'  '  put  of  three  times  more,' 
etc.  .  .  .  Such  fancy  options,  however,  are  not  very  fre- 
quently indulged  in." 

Call  o'  More.    See  "  Call  of  More." 

Calumet.    Calumet  &  Hecla  Mining  Co.     (Copper.) 


62  MONEY    AND    INVESTMENTS 

Cambist.  One  who  deals  in  "  exchange;  "  a  person  posted 
upon  "  foreign  exchange  "  and  the  values  of  the  moneys  of 
different  countries. 

Can.  Pac.    Canadian  Pacific  Railway  Co. 

Capel  Court.    This  is  explained  under  "  Lombard  Street." 

Capital.  As  understood  in  commerce,  "  capital  "  is  money, 
or  its  equivalent  which  may  be  exchanged  for  money  without 
lessening  the  earning  capacity  of  the  enterprise  in  which  it  is 
invested.  Manufactured  goods  are  "  capital  "  in  the  hands 
of  the  manufacturer.  But  in  the  language  of  the  investment 
dealer,  "  capital  "  represents  all  the  money  invested  in  an 
industry,  but  more  particularly  that  part  represented  by 
stock  issues.1 

Capital  Account.  The  question  often  arises  as  to  the  proper 
account  to  charge  expenditures  made  upon  a  property;  that 
is,  whether  such  expenditures  properly  should  be  paid  for  out 
of  the  earnings  of  the  company  —  charged  to  "  operating 
expense  "  —  or  whether  they  may  be  considered  as  actual 
improvements,  and,  therefore,  paid  for  from  increased  capi- 
talization. If  the  latter  case,  it  should  be  definitely  ascer- 
tained if  such  expenditures  will  increase  the  actual  earning 
capacity  of  the  corporation.  To  exhaust  this  subject  by 
numerous  illustrations  which  would  be  necessary,  is  not 
feasible  here.  One  example  must  suffice.  If  a  railway  re- 
places a  wooden  station  with  a  brick  station,  but  thereby  not 
increasing  the  earning  capacity  of  the  road,  such  an  expendi- 
ture represents  a  "  replacement  "  and  should  properly  be 
charged  against  the  earnings  of  the  property;  but  if  the 
same  road  builds  a  side-track  into  some  manufacturing  plant, 
which  results  in  increased  business  to  the  property,  such  an 
expenditure  is  an  "  improvement "  and  may  be  properly 
paid  for  by  increased  capitalization,  although,  of  course, 
many  railroads  would  pay  for  such  an  item  as  this  directly 
out  of  the  earnings,  pursuing  an  ultra-conservative  course. 

Capitalist.  One  who  possesses  considerable  means  which 
may  be  used  in  his  own  business  or  invested  in  the  enterprises 
of  others. 

Capitalization.  For  the  purpose  of  this  work,  this  subject 
has  reference  to  the  stocks  and  bonds  which  a  corporation  has 
outstanding. 

Simplicity  in  "  capitalization  "  is  always  to  be  commended, 
and  the  simpler  form  the  less  likelihood  there  will  be  of  the 

1  Conant  says,  "  Capital  includes  the  whole  aggregate  of  exchangeable 
things  capable  of  ministering  to  production  or  fulfilling  the  desires  of 
men." 

Another  writer  puts  it,  "  Capital  is  wealth  which  is  devoted  or  intended 
to  be  devoted  to  the  production  of  fresh  wealth."  —  "  Economic  Method 
and  Economic  Fallacies,"  W.  W.  Carlile. 


MONEY    AND    INVESTMENTS  63 

need  to  call  the  "  doctors  of  finance  "  in  the  shape  of  a  "  re- 
organization committee."  A  simple  "  capitalization  "  is  one 
class  of  stock  and  perhaps  a  single  issue  of  bonds,  if  desired  - 
secured  by  a  "  first  mortgage."  This  does  not  argue  that 
there  are  not  securities  of  corporations  with  nowhere  near 
this  simple  "  capitalization,"  which  are  not  sound,  for  there 
are  hundreds  of  such  which  are  extremely  safe,  but  these  are 
very  largely  the  outgrowth  of  this  resourceful  and  rapidly 
growing  country.  Many  of  the  older  corporations  did  not 
adequately  provide  for  this  growth  in  their  first  "  capitaliza- 
tion," and  newer  and  more  complex  issues  had  to  be  brought 
out  to  provide  legitimate  funds  for  the  company's  increased 
demand  for  business.  The  advice  at  the  beginning  of  this 
paragraph  is  for  new  companies  forming.  "  Capitalize " 
simply,  and  look  far  enough  ahead  so  that  enough  of  all 
issues  may  be  authorized  to  meet  any  demand  for  increased 
service.1 

Capitalization  of  Earnings.  The  issuing  of  securities  based 
upon  a  corporation's  earning  ability;  the  issuing  of  securities 
upon  which  reasonable  rates  of  interest  or  dividends  can 
probably  be  paid  from  earnings,  rather  than  making  such  is- 
sues equal  in  face  value  to  the  actual  value  of  the  property. 

Capital  Liabilities.  Generally  speaking,  the  total  bond  and 
stock  issues  of  a  corporation. 

Capital  Stock.    See  "  Stock." 

Capping.  In  financial  matters  one  in  the  employ  of  a 
"  bucket  shop,"  who  encourages  business  for  his  employers 
by  apparently  placing  orders  with  them  and  encouraging 
others  to  do  the  same;  his  orders,  of  course,  being  entirely 
fictitious  and  never  put  through  the  books  of  the  concern. 

Car  and  Foundry.    American  Car  &  Foundry  Co. 

Care  of  Securities.  Every  reasonable  precaution  should  be 
taken  against  the  loss  of  a  security,  either  by  theft,  fire, 
or  whatever  the  case  may  be,  and  no  better  precaution  can 
be  taken  than  by  the  rental  of  a  box  in  some  Safe  Deposit 
Company.  There  is  no  recorded  instance  of  an  effort  to 
break  into  a  modern  safe  deposit  vault.  The  physical  ob- 
stacles offered  by  the  construction  are  too  great.  There  are 

JOne  of  our  leading  educators  recently  said:  "There  are  usually  two 
foundations  for  the  capitalization  of  a  business  corporation.  The  first  is 
the  money  actually  paid  for  the  property  or  plant;  the  second  is  the  earn- 
ing power  of  the  plant  and  the  organization.  Both  these  foundations  may 
be  real  and  solid  at  any  given  amount,  but  both  are  liable  to  grave  changes. 
Most  plants  deteriorate  or  waste,  and  constantly  require  partial  replace- 
ment. Earning  power  may  be  unexpectedly  either  increased  or  diminished 
by  natural  causes,  or  by  bad  management  or  fraud.  Injudicious  or  unfaith- 
ful directors  may  fail  to  maintain  the  value  of  a  plant,  or  may  sell  earning 
power  to  other  corporations  or  to  partnerships  or  individuals." 


64  MONEY    AND    INVESTMENTS 

a  great  many  who  think  they  cannot  afford  this;  but  in  the 
long  run  it  is  to  prove  a  very  cheap  method  of  insurance. 
The  keeping  of  one's  securities  in  the  ordinary  safe  in  the 
house,  store,  or  office,  is  practically  no  protection  at  all 
against  the  present  day  scientific  burglar. 

Again,  many  safes  do  not  give  proper  protection  in  case 
of  fire.  The  keeping  of  securities  in  concealed  places,  like  in 
some  old  stocking  or  under  the  bricks  of  the  hearth,  is  like- 
wise unsafe,  especially  in  case  of  fire,  and  the  urgent  advice 
of  securing  the  rental  of  a  safe  deposit  box  is  here  repeated. 

In  any  event,  have  a  complete  list  of  your  securities  and 
keep  the  same  in  a  different  place  from  that  in  which  the 
securities  themselves  are  kept  —  in  an  entirely  different 
building  —  so  that  if  the  securities  are  destroyed  by  fire,  the 
same  fire  will  not  be  likely  to  destroy  the  list.  This  list 
should  be  a  fairly  complete  description  so  that  in  case  of  loss 
the  securities  can  be  so  completely  described  as  to  fully 
identify  them.  It  should  give,  in  each  case,  the  name  of  the 
security,  the  number  it  bears,  if  any,  the  date  of  its  issue,  the 
face  value,  the  rate  of  interest,  when  due;  and  it  will  be  valu- 
able to  take  additional  description,  such  as  when  interest  is 
payable,  of  whom  bought,  etc.  All  this  information  is  valu- 
able, as  it  may  also  save  a  trip  to  one's  safe  deposit  vaults 
to  obtain  information  regarding  some  particular  security, 
which  may  be  wanted  for  other  reasons  than  in  case  of  identi- 
fication on  account  of  loss.  For  instance:  certain  bonds  may 
be  "  called  for  payment  "  and  it  is  often  necessary  to  know 
if  one  holds  any  of  the  numbers  called. 

There  are  small  books  issued,  with  ruled  pages,  with  blank 
spaces  and  printed  headings,  by  the  use  of  which  an  investor 
will  be  guided  in  taking  all  the  information  necessary.  In 
event  of  loss  of  a  security,  notify  immediately  the  corporation 
issuing  the  same,  also  the  banker  from  whom  it  was  purchased, 
giving  in  each  case  a  complete  description  of  the  security. 

If  it  is  a  municipal  bond,  notify  the  municipality  and  the 
banker. 

If  it  is  a  Government  Bond,  see  that  subject. 

If  it  should  be  a  mortgage  upon  real  estate,  bring  the  atten- 
tion of  your  lawyer  to  it  without  loss  of  time. 

(See  "  Bond  of  Indemnity.") 

Car  Lots.  The  daily  record  of  grains  received  and  in- 
spected at  Chicago. 

Car  Mile.  The  travel  of  a  car  one  mile.  It  is  the  unit  of  a  car 
movement  employed  in  all  relations  that  have  to  do  with 
cost  and  service  rendered. 

Carry.  To  furnish  the  money.  A  man  asks  his  broker  to 
"  carry  the  bonds  two  days  "  for  him.  If  he  agrees,  the 


MONEY    AND    INVESTMENTS  65 

broker  understands  he  will  not  be  paid  for  the  bonds  until  the 
expiration  of  that  time,  but  in  the  meantime  he  gets  no  addi- 
tional "  promise  to  pay  "  or  security  on  the  part  of  the  cus- 
tomer. In  this  case  it  is  more  or  less  of  an  accommodation 
to  the  customer;  it  is  simply  a  delayed  delivery  on  a  contract 
to  buy.  In  a  "  joint  account  "  (see  that  subject)  one  of  the 
parties  may  agree  to  "  carry  "  the  bonds  until  sold,  receiving 
certain  special  compensation  therefor,  but  having  no  other 
security  for  furnishing  the  money  than  the  bonds  themselves. 

"  Carry  "  is  a  word  very  commonly  used  in  financial  matters 
with  many  slightly  different  applications,  but  the  above 
should  be  sufficient  to  make  its  meaning  understood,  however 
used.  (See  next  subject.) 

Carrying  Charges.  (See  "  Margin.")  The  interest  charged 
by  brokers  for  the  amount  of  money  advanced  by  them  to 
customers  in  marginal  transactions.  Also  a  Chicago  Board 
of  Trade  term  indicating  storage  rates,  interest,  and  insurance 
on  grain  or  provisions. 

Carrying-over  Day.    Same  as  "  Contango  Day." 

Carry-over.  This  has  reference  to  the  arrangement  (one 
or  all)  for  delayed  deliveries  as  explained  under  "  Contango." 

Cartel.  A  term  used  in  Germany  with  much  the  same  sig- 
nificance as  our  use  of  the  word  "  trust,"  in  relation  to  con- 
trol of  competition  between  rival  firms,  the  limiting  and 
allotting  production  in  harmony  with  the  normal  requirements 
of  the  market,  etc. 

Car  Trust.  A  corporation  formed  for  the  especial  purpose 
of  purchasing  railroad  rolling  stock  and  leasing  the  same  to 
operating  companies.  In  effect,  the  rolling  stock  is  actually 
sold  to  the  operating  company,  which  pays  for  it  by  piece- 
meal, in  the  form  of  a  rental,  the  cars,  etc.,  becoming  its 
property  when  final  payment  is  made. 

Securities  are  often  issued  by  "  car  trusts  "  secured  by  the 
equipment  leased,  the  rentals  as  received  going  to  reduce  the 
indebtedness.  Precautions  to  be  taken  in  such  an  invest- 
ment are  set  forth  under  the  last  paragraph  of  "  Equipment 
Trust,"  all  of  which  subject  read. 

Car  Trust  Certificates.    See  "  Equipment  Trust." 

Cart-wheel.    A  United  States  silver  dollar. 

Cash.  Delivery  of  the  security  sold  before  a  certain  fixed 
hour  upon  the  day  the  contract  is  made. 

A  sale  for  "  cash  "  usually  means  for  immediate  delivery 
and  payment  (stock  exchange  rules)  or,  better,  simultaneous 
delivery  and  payment,  but  among  merchants  payment  in  a 
certain  number  of  days  (say  ten)  is  reckoned  as  "  cash." 

To  "  cash  "  a  piece  of  negotiable  paper,  as  a  check,  is  to 
give  the  holder  money  for  it. 


66  MONEY    AND    INVESTMENTS 

"  Cash  "  is  the  name  of  a  coin  in  use  in  China,  some  of  which 
nearly  every  one  must  have  seen,  at  least  in  the  shape  of  a 
curiosity.  They  are  round  pieces  of  metal  nearly  the  size 
of  our  old-fashioned  cent,  with  a  square  hole  in  the  centre, 
which  is  to  permit  of  their  being  carried  on  strings,  from 
which  rises  the  expression,  "  a  string  of  cash;  "  the  number 
being  required  to  make  a  "  string  "  varying  from  500  to  1,000, 
according  to  the  locality.  The  value  of  these  coins  has 
fluctuated  greatly  within  recent  years,  due  probably  to  the 
fact  that  the  mints  run  by  the  provincial  rulers  in  China, 
and  under  no  imperial  control,  are  turning  them  out  in  large 
quantities  and  at  large  profits. 

"  In  the  United  States,  a  mill  is  a  financial  fraction  for 
which  there  is  no  coin  equivalent.  In  China  the  tael  is  a 
financial  unit  for  which  there  is  no  coin  equivalent.  There 
are  several  other  financial  values  for  which  there  are  no  coin, 
and  only  in  copper  are  currency  and  coinage  synonymous 
terms. 

"  The  word  tael  is  used  both  as  a  measure  of  weight  and  as 
a  measure  of  value.  As  a  weight  measure  the  tael  corresponds 
to  the  American  ounce,  in  that  it  is  one-sixteenth  part  of  a 
Chinese  pound  or  cattie.  A  cattie,  however,  is  usually  1J 
pounds,  so  a  Chinese  ounce  or  tael  is  different  from  an  English 
ounce.  As  a  tael  of  currency  the  weight  ranges  from  540 
to  583  grains.  The  tael  of  currency  is  decimally  divided  down 
to  the  sixteenth  place  of  decimals,  each  with  its  own  name, 
but  usually  only  three  places  of  decimals  are  used,  and  10 
cash  =  1  candarin,  10  candarin  =  1  mace,  10  mace  =  1  tael; 
thus  Ts.  1.256  can  be  read  1  tael,  2  mace,  5  candarins,  and  6 
cash. 

"  Each  province  in  China,  also  each  city  and  many  smaller 
towns,  have  a  different  tael  of  value,  as  the  tael  is  supposed 
to  be  an  ounce  (Chinese)  of  silver,  but  there  is  no  uniformity 
as  to  how  many  grains  constitute  this  ounce,  and  the  fineness 
of  the  silver  also  varies  at  each  point. 

"  The  money  chiefly  used  at  the  foreign  ports  of  China  is 
the  Mexican  silver  dollar.  There  is  an  immense  amount  of 
these  coins  in  circulation.  The  notes  issued  by  foreign  banks 
in  China,  such  as  the  International  Banking  Corporation, 
the  Hongkong  and  Shanghai  Bank,  etc.,  for  $5,  $10,  etc.,  all 
read  '  payable  in  local  currency/  that  is,  Mexican  dollars. 
It  seems  strange  that  China  should  use  money  from  Mexico 
when  she  has  money  of  her  own,  but  the  value  of  the  money 
in  China  varies  so  that  the  foreigners  imported  money  for 
their  own  use  of  which  they  know  the  value,  and  so  this  be- 
came the  currency  of  the  ports. 

"  At  one  time  there  was  an  attempt  to  substitute  an 
American  '  trade '  dollar,  but  the  coin  contained  420  grains 


MONEY    AND    INVESTMENTS  67 

instead  of  the  417.8  grains  of  the  Mexican.  This  was  supposed 
to  gain  the  lead  as  currency  on  account  of  its  superior  weight 
and  hence  value,  but  the  actual  result  was  that,  silver  being 
at  a  premium,  the  Chinese  melted  these  down  as  soon  as 
received,  so  this  experiment  was  a  failure.  Similar  experi- 
ments with  British  and  French  trade  dollars  have  also  been 
failures. 

"  Each  province  of  China  now  issues  silver  dollars,  but  they 
are  not  interchangeable,  and  hence  only  local.  In  fact,  each 
province  charges  a  discount  on  money  from  any  other  prov- 
ince, which  is  the  reason  the  interchangeable  Mexican  dollar 
is  so  popular.  The  Mexican  dollar  and  the  other  coins  are 
widely  counterfeited,  so  that  all  money  received  in  China 
has  to  be  examined  carefully.  Compradors  and  native  mer- 
chants frequently  put  their  own  chop  or  stamp  on  these 
dollars  as  a  guarantee  before  passing  them  on."  l 

Cash  Account.  This  is  the  account  headed  "  Cash  "  in 
bookkeeping,  under  which  all  cash  items  received  shall  be 
placed  upon  the  debit,  or  left-hand  side,  and  all  items  of  cash 
paid  out,  upon  the  credit,  or  right-hand  side.  The  amount  of 
cash  on  hand  should  always  represent  the  difference  between 
the  footings  of  these  two  sides.  "  Cash  "  includes  metallic 
money,  bank  bills,  legal  tender  notes,  checks,  or  other  repre- 
sentatives of  money.  As  it  is  impossible  to  pay  out  more 
cash  than  is  received,  it  is  clear  that  the  credit  side  of  the 
account  will  never  be  greater  than  the  debit  side,  although  it 
may  equal  it. 

Cash  Assets.  Actual  money  on  hand  or  within  easy  reach. 
Property  quickly  convertible  into  money  is  often  included. 

Cash  Book.  One  of  the  account  books  used  in  bookkeeping, 
and  one  of  original  entry.  In  it  are  directly  entered  every 
transaction  involving  receipts  or  expenditures  of  cash,  with 
a  full  explanation  of  each  item.  It  is  customary  among 
many  bookkeepers  to  balance  this  book  at  the  close  of  each 
business  day.  The  balance  at  such  times  should  equal  the 
amount  of  actual  cash  on  hand. 

Cash  Dividend.  A  dividend  paid  in  money  or  its  repre- 
sentative, in  centra-distinction  to  a  "  stock  dividend,"  to 
which  refer. 

Cash  Grain.  Grain  for  delivery  at  once.  "  Spot  Grain  " 
has  the  same  meaning. 

Cashier.  In  banks  or  financial  institutions,  primarily  the 
one  who  has  charge  of  the  cash  or  securities.  This  title  is 
most  commonly  used  in  connection  with  national  banks, 
but  seldom  in  the  case  of  savings  banks.  The  "  cashier  "  of 
a  national  bank  is  an  extremely  important  man,  as  he  is  the 
1  Daily  Consular  and  Trade  Reports  February  7,  1907. 


68  MONEY    AND    INVESTMENTS 

head  executive  officer,  having  direct  charge  of  all  the  work 
of  the  bank,  and  to  him  are  responsible  all  the  bank's  em- 
ployees. 

He  usually  signs  checks,  statements,  and  various  other 
papers  of  the  institution;  buys  and  sells  exchange  to  a  very 
large  extent;  he  may  discount  paper  and  pass  upon  collateral 
securities.  He  must  have  every  detail  of  the  bank's  condition 
at  his  fingers'  ends,  and  be  in  a  position  to  answer  questions 
upon  almost  any  subject  in  connection  with  the  bank's  affairs 
at  any  time.  He  acts  as  secretary  whenever  the  directors' 
meetings  are  held,  and,  in  general,  is  the  most  important 
active  man  in  the  institution. 

Of  course  the  customs  of  various  banks  differ.  In  some  the 
president,  possibly  the  vice-president,  may  take  very  active 
parts  and  take  over  more  or  less  of  the  work  usually  done 
by  the  cashier,  but  the  above  fairly  describes  a  cashier's 
duties  and  responsibilities. 

Cashier's  Check.  A  check  drawn  by  a  bank  against  itself, 
and  usually  signed  by  its  cashier  —  if  it  has  an  officer  with 
such  title  —  payable  when  presented  at  the  bank  drawing  the 
same.  Such  a  check  is  commonly  used  by  a  person  whose  own 
check,  for  the  purpose  desired,  would  not  be  so  readily  ac- 
cepted as  the  check  of  some  known  bank.  A  "  cashier's 
check  "  may  be  used  by  a  person  not  having  a  bank  account, 
and,  therefore,  unable  to  draw  a  check  of  his  own.  Any  such 
person  may  obtain  a  "  cashier's  check  "  at  a  bank  by  paying 
an  equivalent  in  cash;  the  bank,  possibly,  making  some  slight 
charge  for  the  accommodation.  This  check  is  also  used  by 
the  bank  itself  in  paying  for  securities,  bills  of  exchange,  in 
discounting  notes,  and  generally  in  payment  for  supplies, 
expenses,  etc.,  also  for  dividends  to  shareholders;  but  for 
this  purpose  a  special  form  may  be  used.  A  check  drawn  by 
one  bank  against  another  in  a  distant  place,  in  which  it  has 
a  deposit,  is  not  a  "  cashier's  check,"  but  "  New  York  funds  " 
(or  money),  "  Boston  funds,"  etc.,  depending  upon  the  city 
in  which  the  latter  bank  is  located.  The  charge  in  this  case  is 
largely  dependent  upon  the  rate  of  "  exchange "  at  the 
time  upon  the  point  against  which  the  check  is  drawn. 

Cash  Surrender  Value.    See  "  Surrender  Value." 

Castings.  Copper,  which,  from  impurities,  is  defective  in 
strength  and  electrical  conductivity,  but  which  can  be  used  in 
making  castings  for  ordinary  purposes  where  great  strength 
or  electrical  conductivity  is  not  required. 

Cats  and  Dogs.  Low  grade  securities;  those  of  uncertain 
value;  securities  which  do  not  belong  in  the  investment  class, 
but  are  highly  speculative. 

Cattle  Paper.     A  note  that  is  secured  by  a  mortgage  on 


MONEY    AND    INVESTMENTS  69 

stock  cattle,  or  cattle  in  the  feed  lot;  that  is,  cattle  which  are 
being  prepared  for  the  market  either  by  the  producer  or 
breeder,  or  by  the  feeder  who  takes  developed  cattle  and 
fattens  them.  These  notes  are  almost  invariably  secured  by 
a  mortgage  on  the  cattle,  and  are  not  usually  "  discounted  " 
(see  that  subject),  but  with  interest  running  from  date.  A 
chattel  mortgage  securing  the  note  includes,  in  some  cases, 
the  corn  which  is  being  fed  to  the  cattle.  Strictly  speaking, 
"  cattle  paper  "  would  not  include  a  note  secured  by  a  mort- 
gage on  dairy  cows.  These  notes  are  mostly  made  by  banks 
situated  in,  or  tributary  to,  the  grazing  section  of  the  country. 

Caveat.    In  the  financial  sense,  a  notice  to  stop  payment. 

C.  B.  The  "  ticker  "  abbreviation  for  "  currency  bonds;  " 
i.  e.  bonds  payable  in  lawful  money,  but  not  specifically  in 
gold  coin. 

Cent.  The  smallest  coin  in  value  of  the  United  States,  con- 
taining 45.60  grains  of  fine  copper  and  2.40  grains  of  tin  and 
zinc.  Legal  tender  in  amounts  not  exceeding  25  cents. 

Cental.    One  hundred  pounds  weight,  avoirdupois. 

Centavos.1  Subsidiary  silver  coins  of  the  Philippine  Islands 
of  the  following  denominations: 

50  Centavos  of  the  weight  of  208  grains 
20         "         "     "         "       "     83.10  " 
10  "       "     41.55  " 

All  the  above  to  be,  by  weight,  900  parts  of  pure  metal  and 
100  parts  of  copper  alloy.  One  hundred  centavos  equal  1 
peso,  which  in  turn  equals  50  cents  in  our  money.  One 
centavo  is  equivalent  to  \  of  our  cent. 

Minor  coins  of  copper,  metal,  etc.,  of  lesser  denominations 
than  the  above  are  also  in  circulation. 

Centennial.    Centennial  Copper  Mining  Co. 

Centime.  The  smallest  French  coin,  the  one  hundredth 
part  of  a  franc,  and  equivalent  to  about  one-fifth  of  a  cent 
in  United  States  money. 

1  In  December,  1906,  owing  to  the  rise  in  the  market  price  of  silver,  the 
silver  coins  of  the  Philippines  were  changed.  This  was  necessitated  by 
the  fact  that  the  pure  metal  in  the  previous  standard  was  worth  more  in 
the  market  than  the  face  value  of  the  coins,  making  it  an  object  to  melt  up 
the  coins  and  sell  the  silver  as  bullion.  As  a  result  the  subsidiary  coinage 
was  changed,  thus: 

50  Centavos  of  the  weight  of  154  32  grains 
20        «         «     «         «       «    61.728     " 
10        "         "     "        "       "    30.864     " 

All  the  above  to  be  by  weight  750  parts  pure  metal  and  250  parts  copper 
alloy. 

For  the  foregoing,  I  am  indebted  to  Frank  Mclntyre,  Captain  19th  U.  S. 
Infantry,  Assistant  to  Chief  of  Bureau  of  Insular  Affairs,  Washington,  D.  C. 


70  MONEY    AND    INVESTMENTS 

Central  Reserve  Banks.  National  banks  located  in  New 
York  City,  St.  Louis,  and  Chicago.  (See  "  Central  Reserve 
Cities.") 

Central  Reserve  Cities.  Certain  of  the  largest  cities  in  the 
United  States  in  which  all  national  banks  are  obliged  by 
law  to  keep  25%  of  the  total  amount  of  the  money  on  deposit 
with  them  on  hand,1  which  is  called  a  "  reserve."  Such 
banks  may  act  as  "  reserve  agents  "  for  national  banks  lo- 
cated in  what  are  known  as  "  reserve  cities  "  or  "  undesig- 
nated  cities."  On  March  27,  1905,  the  "  central  reserve 
cities  "  consisted  of  New  York,  Chicago,  and  St.  Louis. 

Certificates  of  Beneficial  Interest.  See  "  Beneficial  Interest." 

Certificate  of  Deposit.  An  acknowledgment  in  writing  given 
by  a  bank  that  it  has  received  from  the  person  named  a  stated 
sum  of  money  on  deposit.2  As  a  rule  it  draws  interest,  and 
may  be  either  made  payable  on  demand  or  at  a  specified  time. 
If  John  Smith  holds  a-  "  certificate  of  deposit  "  he  cannot 
secure  the  money  given  over  to  the  bank  by  drawing  a  check 
against  it,  but,  instead,  must  either  present  his  "  certificate  of 
deposit,"  or  it  may  be  presented  by  some  one  else  after  being 
properly  indorsed  by  John  Smith. 

Savings  bank-books  are  to  all  intents  and  purposes  certifi- 
cates of  this  kind. 

Some  banks  reserve  the  right  in  their  "  certificates  of  de- 
posit "  or  bank-books,  to  demand  a  certain  notice,  say  sixty 
or  ninety  days,  before  payment.  This  right,  however,  is  very 
seldom  exercised  except  in  case  of  money  stringency  or  im- 
pending financial  disaster. 

Certificates  of  this  nature  may  be  used  to  transfer  funds 
from  one  point  to  another,  the  same  as  a  money-order  or  a 
cashier's  check.  The  certificate  may  be  issued  directly  to 
the  party  depositing  the  money,  and  by  him  made  payable  by 
indorsement  to  whomsoever  he  wishes,  or  may  be  drawn 
directly  to  the  party  to  whom  it  is  wished  to  transfer  the 
money.  It  must  be  borne  in  mind,  however,  that  whoever 
receives  the  certificate  must  present  it  in  person  before  he 
can  receive  the  money,  or  forward  it  properly  indorsed  for 
collection.  In  case  a  partial  payment  is  desired  upon  a 
"  certificate  of  deposit  "  the  old  one  is  cancelled,  and  a  new 
one  issued  for  the  balance  due. 

1  A  bank's  "five  per  cent,  redemption  fund"  (see  that  subject),  how- 
ever, may  be  counted  as  a  portion  of  this  reserve,  which  must  be  in  "  lawful 
money,"  i.e.  gold  coin,  standard  silver  dollars,  fractional  silver,  silver  cer- 
tificates, gold  certificates,  clearing-house  certificates,  United  States  Notes, 
and  Treasury  Notes  of  1890. 

2  The  Courts  of  California  declare  a  "  certificate  of  deposit "  to  be  a 
negotiable  instrument  and  in  substance  and  effect  the  same  as  a  "  promis- 
sory note." 


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MONEY    AND    INVESTMENTS  71 

A  simple  form  of  "  certificate  of  deposit  "  is  as  follows: 
DARTMOUTH  TRUST  COMPANY 

No Boston,  Mass.  .   .   .  19  .   .      $  .... 

This  is  to  certify,  That  there  has  been  deposited  with  this 

Company Dollars 

payable  to or  order 

in  current  funds,  with  interest  at  the  rate  of  .   .   .  per  cent,  per 
annum,  upon  surrender  of  this  Certificate. 

Countersigned  DARTMOUTH  TRUST  COMPANY. 


By 

Teller.  Treasurer. 


A  "  certificate  of  deposit  "  may  also  be  issued  by,  say, 
some  trust  company  as  a  receipt  showing  the  deposit  of 
some  security  under  a  plan  of  reorganization  or  some  such 
matter. 

Certificate  of  Incorporation.  When  it  is  desired  to  form  an 
incorporated  company,  a  paper  called  a  "  certificate  of  in- 
corporation," or  one  having  a  similar  title,  must  be  filed  with 
the  Secretary  of  the  State  under  which  it  is  desired  to  in- 
corporate. Such  papers,  in  their  requirements,  vary  in  the 
different  States,  but  in  general  must  give  about  such  informa- 
tion as  follows: 

Names  of  the  officers  and  the  majority  of  the  directors, 
name  of  the  corporation  and  the  purpose  for  which  it  is  con- 
stituted, the  location  of  the  principal  place  of  business,  the 
kinds  and  amount  of  stock,  the  day  of  the  first  meeting,  a 
copy  of  the  articles  of  agreement,  etc. 

Certificate  of  Indebtedness.  Simply  a  floating  indebtedness 
in  more  or  less  of  a  fixed  form.  Let  us  take  the  example  of 
a  corporation  which  wishes  to  borrow  some  large  sum  of 
money  —  a  million  dollars  or  more  —  for  some  definite 
period,  say  one  year.  It  not  being,  perhaps,  possible  to  make 
one  loan  to  cover  this  sum,  the  amount  may  be  divided  into 
smaller  notes  of  $5,000  or  $10,000  denominations,  and  placed 
among  different  holders.  Such  a  security  might  bear  the 
title  of  "  certificate  of  indebtedness."  It  is  nothing  more  than 
a  "  promissory  note."  In  case  of  failure  on  the  part  of  the 
company  to  pay  the  same  the  holder  has  no  recourse  except 
application  for  a  receiver. 


72  MONEY    AND    INVESTMENTS 

Certificate  of  Stock.    See  "  Stock  Certificate." 

Certificate  of  Trustee.     Explained  under  "  Trustee." 

Certification.     See  "  Certified  Check." 

Certified.  Any  fact  which  has  been  vouched  for  in  writing. 
The  expression  is  often  seen,  "  the  issue  is  (has  been)  certified 
to  by,"  and  then  naming  some  trust  company.  The  meaning 
of  this  is  that  the  company  which  is  named  in  the  mortgage 
as  trustee  is  not  supposed  to  allow  the  bonds  to  be  issued 
until  all  the  provisions  in  the  mortgage  leading  up  to  the 
issue  of  the  bonds  have  been  fulfilled.  There  is,  as  a  rule,  a 
printed  form  on  each  bond,  to  be  properly  signed  by  the 
trust  company  as  the  last  necessary  act  before  the  actual 
delivery  of  the  bond,  and  which  makes  it  a  binding  obligation 
upon  the  corporation  issuing  the  same.  This  is  only  in  the 
case  of  a  corporation  issue  and  not  necessary  in  relation  to 
a  municipal  bond.  (See  also  "  Certified  Check.") 

Certified  Accountant.    See  "  Certified  Public  Accountant." 

Certified  Check.  A  check  across  which  some  competent 
bank  officer  has  written,  or  stamped,1  over  his  signature, 
satisfactory  evidence  that  the  person  having  drawn  the  check 
has  sufficient  funds  on  deposit  at  the  bank  to  pay  it  when 
presented.  Such  a  check  takes  precedence  over  other  checks, 
not  "  certified,"  drawn  by  the  same  person,  and  at  the  time 
of  "  certification  "  the  amount  of  the  check  is  deducted  from 
the  funds  to  the  credit  of  the  depositor.  "  Certified  checks  " 
are  very  much  in  use  as  safeguards,  and  in  financial  transac- 
tions it  is  desirable,  if  a  payment  of  a  considerable  sum  is  to 
be  made  by  check,  to  present  a  "  certified  "  one.  A  "  certified 
check  "  may  be  returned  tio  the  bank  and  cancelled  if  not  used. 
The  certifying  of  a  check  is  not  obligatory  upon  a  bank,  but 
an  act  of  accommodation.  After  certification,  a  bank  may  be 
held  for  payment  (except  in  case  of  a  "  raised  check  "),but 
no  other  parties  thereto,  unless  the  certification  was  obtained 
by  the  one  who  drew  it. 

To  obtain  a  check  of  this  kind,  draw,  in  favour  of  the  party 
to  whom  you  wish  to  make  payment,  a  check  against  your 
bank  in  the  ordinary  form,  and  either  present  it  in  person  or 
by  messenger  to  the  bank,  with  the  request  for  certification. 

Many  banks  have  pursued  the  policy  of  "  over-certifying;  " 
that  is,  certifying  a  check  for  a  greater  amount  of  money  than 
the  depositor  has  to  his  credit,  as  a  matter  of  accommodation, 
the  understanding  being  that  it  is  to  be  for  a  very  brief  period, 
the  depositor  making  good  the  deficit  some  time  during  the 

1  There  are  various  forms  of  wording  used  for  the  stamping  on  a  check 
for  this  purpose,  such  as,  "  Good  when  properly  indorsed,"  "  Good  through 
the  Clearing-House,"  "  Accepted,"  etc.,  to  which,  of  course,  must  be  added 
the  date  and  the  official  signature. 


MONEY    AND    INVESTMENTS  73 

day.  This  is  not  strictly  proper  banking.  In  fact,  it  is  pro- 
hibited for  national  banks  to  "  over-certify  "  a  check. 

Certified  Public  Accountant.  One  who  has  passed  an 
examination  (in  certain  States)  and  received  a  certificate 
authorizing  him  to  use  the  title  "  Certified  Public  Accountant," 
or  the  initials  "  C.  P.  A.,"  which  signifies  that  he  is  qualified, 
by  the  test  of  that  State,  to  perform  such  duties  as  set  forth 
under  the  subject  "  Auditor." 

In  Great  Britain  "  chartered  accountant  "  has  the  same 
meaning." 

CH.  The  "  ticker  "  abbreviation  for  "  Stock  Exchange 
Clearing-House." 

Change.    Stock  exchange  is  the  meaning  in  this  country. 

Charged  Down  (or  Charged  Off).  Reducing  the  "  book 
value  "  of  a  property  in  accordance  with  the  market  value  at 
the  time  is  called  "  charging  down;  "  for  example,  a  banking 
house  owns  $100,000  worth  of  bonds,  which,  since  purchase, 
have  declined  in  salable  or  market  value  five  per  cent,  below 
the  original  cost.  In  order  that  the  banking  house  may  not 
be  deceiving  itself  in  its  bookkeeping,  it  reduces  the  value  of 
these  bonds  by  $5,000,  charging  the  amount  of  such  re- 
duction against  any  profits  which  it  may  have,  and  the  $5,- 
000  is  the  amount  "  charged  off."  This  method  of  "  char- 
ging down  "  is  pursued  not  only  in  the  case  of  securities  where 
a  loss  is  incurred,  or  merchandise  owned,  which  may  have 
depreciated,  but  in  the  case  of  a  manufacturing  corporation 
a  certain  proportion  each  year  of  the  value  of  the  machinery, 
or,  in  fact,  anything  subject  to  wear  and  tear  is  "  charged 
down." 

Charge  Ticket.  (See  "  Bank-Book.")  Also  a  form  or  blank 
used  among  "  clearing-houses." 

Charter.  A  governmental  or  State  grant  of  certain  powers 
and  privileges  to  a  company  at  the  time  of  its  incorporation. 
A  railway  company  must  obtain  a  charter  before  it  can  have 
legal  existence. 

Also  the  engagement  of  a  vessel  to  carry  grain  to  a  certain 
point  at  a  fixed  rate. 

Charter  Bonds.  United  States  Government  bonds  legally 
required  to  be  deposited  with  the  Treasurer  of  the  United 
States  before  a  certificate  of  authority  will  be  issued  for  the 
bank  to  begin  business. 

Chartered  Accountant.  The  same  as  an  "  auditor,"  to  which 
refer;  only  a  "  chartered  accountant  "  is  one  officially 
authorized  to  do  such  work,  and  is  an  English  title  for  one 
who  holds  a  charter  from  the  "  Institute  of  Chartered  Ac- 
countants." 


74  MONEY    AND    INVESTMENTS 

Chartered  Public  Accountant.  See  "  Chartered  Accountant " 
and  "  Auditor." 

Charter  Number.  Each  national  bank,  at  the  time  of  be- 
ginning business,  is  assigned  a  certain  number  by  the  govern- 
ment which  is  expected  to  appear  on  all  its  stationery,  called 
its  "  charter  number."  This  number  always  appears  on  a 
bank's  circulating  notes. 

Chasing  Eighths  and  Quarters.  Used  in  reference  to  one 
satisfied  with  small  profits. 

Chattel  Mortgage.  A  mortgage  on  personal  property, 
movable  goods,  or  live  stock,  and  given  to  secure  a  debt  or 
promise  in  much  the  same  manner  as  is  a  mortgage  upon  real 
estate.  A  mortgage  of  this  kind  should  be  "  recorded  "  the 
same  as  a  mortgage  on  real  estate.  (See  "  Mortgage  "  in 
relation  to  fire  insurance  and  recording.) 

Chattels.  Movable  goods  of  all  kinds;  live  stock,  household 
furniture,  and  property  other  than  real.  (See  "  Real  Prop- 
erty.") 

Cheap  Money.  Low  interest  rates;  i.  e.  money  can  be 
hired  at  a  low  rental. 

Check.1  A  written  order  by  a  person  having  money,  or  the 
equivalent  of  money,  in  a  banking  institution  for  it  to  pay, 
on  demand,  during  banking  hours,  a  stated  sum  to  the  person 
named  in  the  order,  or  to  whomsoever  that  person  may  in 
turn,  by  proper  indorsement  (see  "  Indorse  "),  direct  it  to 
be  paid.  As  strange  as  it  may  seem,  there  are  a  great  many 
people  who  know  comparatively  little  about  drawing  a  check, 
and  who  do  not  take  proper  precaution  in  so  doing. 

The  two  common  forms  of  checks  are  as  follows: 


Keesvitte,  N.  Y.,  Jan.  2,  1906. 
$75.00. 

The  First  National  Bank 
Pay  to  the  order  of  Charles   King 

Seventy-five Dollars. 

No.  611.  Richard  Ordway. 


1  By  statute  a  "  check  "  is  a  "  bill  of  exchange  drawn  on  a  bank  and 
payable  on  demand." 


MONEY    AND    INVESTMENTS  75 

KeesviUe,  N.  Y.,  Jan.  2,  1906. 


The  First  National  Bank 

Pay  to  the  order  of  Frank  Yeaton  -  or  bearer 
One  hundred  twenty-five  --  .  ^  Dollars. 
No.  207.  Richard  Ordway. 

The  first  form  of  check  is  practically  the  only  one  now  in 
use,  for  in  the  second  case,  the  check  is  good  in  the  hands  of 
Frank  Yeaton,  or  in  the  hands  of  any  one  else,  without 
Yeaton's  indorsement;  therefore,  care  must  be  taken  not  to 
lose  it.  A  check  of  the  same  character  may  be  drawn  by 
making  it  payable  to  "  cash  "  or  "  currency,"  and  using  the 
first  form.  To  deposit  a  check  drawn  in  this  way  the  bank 
should  require  the  indorsement  of  the  depositor,  so,  in  case 
Richard  Ordway,  the  "  maker  "  of  it,  is  not  good  for  the 
amount,  then  the  depositor  who  indorsed  it  can  be  held  re- 
sponsible. The  first  form  of  a  check  is  only  good  in  the  hands 
of  Charles  King,  unless  he  signs  his  name  upon  the  back,  in 
which  event  it  is  payable  to  any  one  holding  the  check,  unless 
it  is  suspected  of  being  in  the  hands  of  a  thief.  A  check, 
however,  made  payable  to  "  cash  "  or  "  bearer  "  is  good  in 
the  hands  of  any  one,  always  excepting  the  thief,  without 
indorsement  upon  the  back.  In  filling  out  the  blanks,  as  in 
the  case  of,  "  Pay  to  the  order  of  Frank  Yeaton,  or  bearer," 
it  is  better  to  fill  in  all  the  remaining  part  of  the  blank  with 
a  wavy  line,  so  that  no  additional  writing  can  be  inserted; 
the  same,  and  more  particularly  so,  in  the  blank  in  which  the 
amount  is  filled  out.  For  instance,  it  would  be  very  easy, 
if  a  check  were  drawn  for  fifty  dollars  to  insert  "  two  hundred  " 
before  it,  making  it  "  Two  hundred  fifty  dollars,"  if  there  had 
been  sufficient  room  left  without  any  wavy  line  being  filled 
in.  The  better  way  is  to  begin  the  writing  of  the  amount, 
and  the  name  of  the  person  to  whom  the  check  is  payable, 
as  far  to  the  left  as  possible,  in  the  spaces  left  for  their  in- 
sertion, filling  up  the  remainder  of  the  spaces  with  wavy  ink 
lines. 

When  a  check,  in  the  hands  of  a  dishonest  person,  is  in- 
creased in  amount,  by  changing  or  adding  figures,  it  is  said 
to  be  "  raised."  In  the  corner  of  the  check  the  amount  should 
be  in  figures  and  agree  with  the  sum  preceding  the  word 
"  dollars,"  which  sum  should  always  be  in  written  words,  not 
figures.  If  the  amount  in  figures  does  not  agree  with  the 


76  MONEY    AND    INVESTMENTS 

amount  in  writing,  and  the  bank  at  which  it  is  presented  for 
payment  is  unable  to  communicate  with  the  person  who  wrote 
the  check  to  ascertain  which  amount  is  correct,  it  pays  the 
latter  amount.  (For  information  regarding  "  indorsing  checks 
far  deposit,"  "  in  blank  "  and  all  facts  relating  to  "  indorsing," 
see  matter  under  "  Indorse.") 

It  is  a  very  common  practice  among  people  not  familiar 
with  business  affairs,  to  hold  checks  in  their  possession  with- 
out presenting  for  payment  for  a  long  period,  thinking,  possibly 
there  is  no  need  of  cashing  them  until  the  money  is  actually 
needed.  This  is  wrong  for  several  reasons:  First,  it  is  an 
annoyance  to  the  person  who  drew  the  check,  if  it  happens 
that  he  desires  to  balance  his  bank-book  in  the  meantime; 
Second,  in  case  of  financial  failure  on  the  part  of  the  person 
who  drew  the  check,  after  drawing  of  the  same,  the  holder  of 
such  a  check  would  not  have  any  claim  for  payment  in  case 
other  checks  should  have  been  presented  and  paid  in  the 
meantime;  that  is,  he  would  not  have  prior  claim  to  such 
checks,  although  his  was  drawn  before  those,  for  the  law 
would  hold  him  negligent;  Third,  in  case  of  the  failure  of  the 
bank  itself,  the  holder  who  has  delayed  the  presentation  of  a 
check  an  unreasonable  time  will  suffer  the  loss  even  if  the 
drawer  of  the  check  has  funds  to  meet  it  in  the  bank  at  the 
time  of  failure;  Fourth,  a  most  important  reason,  i.  e.  to 
hold  the  "  indorser  "  or  "  indorsers."  A  holder  of  a  check 
should  present  for  payment  or  forward  for  collection  without 
loss  of  time;  in  no  event  beyond  the  second  day  after  its  re- 
ceipt, and  all  who  are  parties  to  the  collection  thereto  should 
send  it  along  on  its  course  for  collection  the  day  received, 
Sundays  and  holidays  excepted.  The  only  exception 
thereto  may  be  that  of  the  case  of  the  bank  which  receives 
it  for  final  collection  which  may  postpone  presentation 
till  the  following  business  day,  if  received  after  banking 
hours. 

The  law  expects  checks  to  go  forward  in  their  usual  course 
for  collection  without  unnecessary  delay,  and  any  delay  is 
entirely  at  the  holder's  risk.  Again,  a  bank  may  hesitate  to 
pay  a  check  long  since  dated,  on  the  supposition  that  it  may 
have  been  lost  and  the  liability  discharged  by  another  check, 
or  in  some  other  way. 

Should  there  be  checks  outstanding  and  not  presented  for 
payment  at  the  time  of  the  death  of  the  one  who  drew  them, 
in  most  of  our  States  such  checks  would  cease  to  have  value 
and  should  not  be  cashed  by  the  bank  upon  which  drawn. 
However,  ignorance  of  the  death  of  the  depositor  would, 
protect  the  bank  in  case  of  cashing  such  checks. 

Do  not  date  a  check  so  far  ahead  that  it  may  be  presented 
for  payment  prior  to  its  date,  as  such  a  check  should  not  be 


MONEY    AND    INVESTMENTS  77 

paid  by  the  bank  when  so  presented.  In  England  it  is  illegal 
to  "  post  date  "  a  check. 

If  a  check  comes  into  the  holder's  possession  without  being 
dated,  and  the  date  of  its  execution  is  not  known,  he  may 
insert  the  date  upon  which  it  is  received  by  him. 

A  bank  is  not  bound  to  pay  checks  in  the  order  in  which 
they  are  drawn,  but  may  pay  them  in  the  order  presented, 
even  although  the  aggregate  amount  of  the  checks  outstand- 
ing may  exceed  the  depositor's  account,  and  some  of  the  earlier 
drawn  checks  may  happen  to  be  presented  after  subsequently 
drawn  checks,  and  thus  at  a  time  when  funds  are  depleted. 
(See  "  No  Funds.") 

Cheeks  should  be  numbered,  likewise  the  "  stub."  (See 
"  Check-Book.") 

Always  sign  a  check  as  nearly  as  possible  like  the  signature 
as  originally  entered  upon  the  signature  book  of  the  bank. 

If,  in  drawing  a  check,  an  error  is  made,  do  not  attempt  to 
correct  it;  remove  the  check  from  the  book,  destroy  the  check, 
taking  particular  care  to  mutilate  the  signature  if  it  has  been 
attached,  and  then,  in  large  plain  letters,  write  the  word 
"  Void  "  across  the  stub.  Emphasis  is  laid  upon  making  no 
attempt  whatsoever  at  correction  in  a  check. 

If  one  wishes  to  draw  a  check  for  a  sum  less  than  $1.00, 
some  extra  precaution  should  be  taken  so  that  the  amount  — 
which  really  represents  cents  —  shall  not  be  changed,  in  the 
hands  of  a  dishonest  person,  to  mean  dollars.  One  good 
method  is  to  insert  in  the  blank  in  that  part  of  the  check  pre- 
ceding the  word  "  Dollars,"  "  Only  sixty  cents,"  for  example, 
finishing  out  with  a  wavy  line,  and  lining  out  "  Dollars."  It 
would  be  a  difficult  matter  to  make  "  Only  sixty  cents  " 
read  as  "  Sixty  Dollars."  Stamps  are  often  used  across  the 
face  of  a  check,  the  words  either  being  in  ink  or  cut  through 
the  check,  showing  that  it  must  not  be  cashed  in  excess  of  a 
stated  amount,  as,  for  instance,  in  the  above  case,  "  Not 
Exceeding  $1.00." 

If,  for  any  reason,  the  drawer  of  a  check,  after  issuing  same, 
wishes  to  stop  its  payment,  he  has  simply  to  notify  the  bank 
to  that  effect,  under  which  circumstances  it  is  incumbent 
upon  the  bank  to  refuse  payment,  letting  the  holder  collect 
his  claim  in  any  way  he  can.  If  notice  is  given  in  writing 
to  stop  payment,  a  description  of  the  check,  such  as  date  of 
issue,  number,  to  whom  drawn,  and  amount,  should  be  given. 

Should  a  bank  pay  a  check  upon  which  an  indorsement 
has  been  forged  and  so  make  payment  to  an  improper  holder, 
the  bank  must  make  the  amount  good  to  the  real  owner. 

The  check  is  always  a  good  receipt  as  evidence  of  a  pay- 
ment, and,  therefore,  all  checks  should  be  preserved  and  prop- 
,erly  filed  as  described  under  "  Check-Book." 


78  MONEY    AND    INVESTMENTS 

It  is  interesting  to  note  that  the  Wall  Street  Journal  states 
that  95%  of  the  current  bank  deposits  are  in  checks  and  only 
5%  in  money;  that  for  the  last  fifty-two  years  the  only  bal- 
ances paid  in  cash  at  the  New  York  Clearing-House  have 
averaged  4.74%  of  the  clearings.  It  would  appear  from  these 
statistics  that  at  least  90%  of  the  business  of  the  country  is 
conducted  by  the  use  of  bank  credits. 

Check-Book.1  A  depositor  in  a  national  bank,  trust  com- 
pany, or  any  other  "  bank  of  deposit,"  is  provided  by  the 
bank  with  a  book  of  checks,  by  which  means  the  money  de- 
posited may  be  withdrawn.  This  book  contains  blanks  which 
the  depositor  fills  out  and  signs,  and  which  then  become 
orders  upon  the  bank  to  pay  a  stated  sum  of  money  to  some 
person  designated  in  the  check,  or  to  his  order,  the  amount  so 
paid  to  be  charged  against  the  depositor's  account.  (For  more 
information  regarding  this  subject  read  carefully  the  matter 
under  "  Check.") 

The  depositor  should  also  use  this  book  as  a  method  of 
keeping  track  of  all  his  transactions  with  the  bank.  The 
check  itself  may  be  detached  from  what  is  called  the  "  stub," 
that  is,  the  portion  of  the  leaf  which  is  bound  into  the  book 
permanently.  On  the  stub  he  enters,  in  a  blank  to  be  found 
for  the  purpose,  practically  a  duplicate  of  what  is  filled  out 
upon  the  check  itself.  Each  check  should  be  numbered,  as 
well  as  the  stub,  the  two  always  agreeing.  On  the  stub,  such 
additional  information  is  entered,  as  the  purpose  for  which 
the  check  was  drawn,  etc. 

On  the  reverse  side  of  the  stub  will  be  found  a  blank  in 
which  should  be  entered  all  deposits;  the  date,  the  nature  of 
the  deposit,  and  the  amount.  After  the  drawing  of  a  number 
of  checks,  depending  upon  the  arrangement  of  the  book, 
which  will  be  easily  understood  by  examination,  the  total  of 
such  checks  is  deducted  from  the  sum  on  deposit,  and  the 
amount  left  carried  forward  to  the  top  of  the  back  of  the  next 
stub.  This  process  being  repeated  from  time  to  time  enables 
a  depositor  to  easily  determine  just  the  sum  of  money  in  the 
bank  to  his  credit.  As  a  matter  of  precaution,  it  is  always 
well  to  fill  out  the  stub  before  drawing  the  check.  This  habit, 
persistently  adhered  to,  will  prevent  the  possibility  of  a  check 
being  drawn  without  any  record  being  retained  of  it. 

As  checks  are  a  good  proof  of  payment  it  is  most  important 
that  they  be  kept  in  some  manner  for  convenient  reference  — 
no  slipshod  method  should  be  tolerated.     A  good  way  is  to 
paste  each  check  to  the  edge  of  its  corresponding  stub  after 
the  check-book  has  been  exhausted  and  the  checks  returned. 

1  In  this  connection,  it  would  be  well  to  turn  to  "  Bank  Account."  and 
"  Bank-Book." 


MONEY    AND    INVESTMENTS  79 

On  the  outside  of  the  cover  paste  a  slip  of  paper  with  the 
information  as  to  date  of  first  and  last  checks  drawn  and 
numbers  contained  therein. 

Check  Collections.    See  "  Collections." 

Checking  Out.     See  "  Overdraw." 

Cheque.     The  English  spelling  for  "  check." 

Cheque  Bank.  An  English  institution  which  formerly 
issued  checks  to  persons  desiring  to  remit  money  to  a  distant 
point.  A  postal  money-order  or  express  money-order  in 
this  country  serves  the  same  purpose. 

Further  functions  of  this  institution  were  as  set  forth  by 
one  well-known  financial  writer  as  follows: 

"  The  Cheque  Bank  proceeds  on  the  new  principle  of 
issuing  cheques  which  can  be  filled  up  only  to  limited  amounts, 
as  shown  by  printed  and  indelible  perforated  notices  upon 
the  forms.  These  cheques,  too,  are  only  to  be  had  in  exchange 
for  the  utmost  sum  for  which  they  can  be  drawn,  which  sum 
is  retained  as  a  deposit  until  each  corresponding  cheque  has 
been  presented.  It  follows  that  each  cheque,  when  duly 
filled  up  and  signed  by  the  owner,  is  as  good  as  a  bank-note 
issued  against  a  documentary  reserve."1 

Chicago  Board  of  Trade.  See  "  Board  of  Trade  of  the  City 
of  Chicago." 

Chicago  Junction.  Chicago  Junction  Railways  &  Union 
Stock  Yards  Co. 

China  —  Money  of.    See  "  Tael  "  and  last  part  of  "  Cash." 

Chopped.  The  Mexican  dollar,  which  is  in  current  use  in 
China,  before  it  is  accepted  by  the  people,  must  be  stamped 
or  "  chopped  "  by  some  well-known  mercantile  concern  or 
local  governor,  as  a  voucher  for  its  weight  and  fineness.  Many 
of  the  United  States  trade  dollars,  which  were  returned  for 
redemption  in  1887,  bear  these  Chinese  stamps.2 

C.  I.  F.    Charges,  insurance,  and  freight  paid  or  included. 

Cipher  Code.  A  method  used  in  telegraphing  or  cabling, 
by  which  one  word  may  be  interpreted,  by  the  use  of  a  key, 
to  mean  several  words  or  an  entire  sentence,  thus  not  only 
reducing  the  cost  of  the  message,  but  at  the  same  time  enabling 
the  contents  of  the  message  to  be  kept  secret,  supposing  a 
private  cipher  code  to  be  used.  There  are,  however,  many 
codes  upon  the  market  which  are  in  general  use:  but  the 
sender  of  a  message  in  such  a  code  should  refer  to  the  name 
of  the  code  used  as  the  first  word  in  his  message,  unless  it  is 
understood  between  the  sender  and  the  receiver  the  particular 
cipher  code  from  which  the  message  was  compiled. 

1  "  Money  and  the  Mechanism  of  Exchange,"  Jevons. 

2  Muhlman's  "  Monetary  Systems  of  the  World." 


80  MONEY    AND    INVESTMENTS 

Circular.     See  "  Prospectus." 

Circular  Letter  of  Credit.    See  "  Letter  of  Credit." 

Circulating  Note.    A  bank-note  or  other  paper  money. 

Circulation.    See  "  National  Bank  Notes." 

Circulation  Per  Capita  in  the  United  States.  The  actual 
metallic  and  paper  money  in  circulation,  as  shown  by  the 
United  States  Treasury  Department,  beginning  with  the  year 
1800  is  given  a  place  here  (ten  year  intervals  only,  however, 
are  selected). 

1800  —  $4.99  1840  —  $10.91  1880  —  $19.41 

1810—    7.60  1850—    12.02  1890—    22.82 

1820—    6.96  1860—    13.85  1900—    26.94 

1830—    6.78  1870—    17.50  1907—    33.96 

City  Clearings.  First  understand  the  matter  under  "  Clear- 
ing-House." "  City  clearings  "  cover  that  territory  which  is 
tributary  to,  or  "  clears  "  directly  through,  a  given  clearing- 
house. 

City  Collections.  A  bank  terms  its  "  city  collections  "  its 
checks,  etc.,  payable  in  the  same  city  in  which  it  is  located. 

City  Item.  First  read  "  Item."  This  is  used  to  designate  a 
check,  draft,  etc.,  drawn  against  a  bank  in  a  certain  clearing- 
house centre  from  one  drawn  against  an  out-of-town  institu- 
tion, the  latter  being  referred  to  as  an  "  out-of-town  item." 

C.  L.     Car-load  lots. 

Clean  Bill  of  Exchange.  (See  "  Documentary  Bill.")  One 
unaccompanied  by  documents.  Very  commonly  a  draft 
drawn  by  an  exporter  against  funds  to  his  credit  in  a  bank 
abroad,  in  which  event  he  has  chosen  to  collect  his  own  bill 
through  some  foreign  banker.  He  may  choose  to  make  his 
draft  payable  at  "  sight,"  or  in  thirty,  sixty,  or  ninety  days, 
or  may  draw  under  a  letter  of  credit  in  advance  of  the  shipping 
of  the  documents,  which  are  to  be  sent  later. 

Clear.  To  free  from  encumbrance.  Bonds,  stocks,  or  any 
securities,  are  "  cleared  "  when  the  person  who  has  contracted 
to  purchase  them  pays  for  and  receives  delivery  of  the  same. 
Or  a  broker,  acting  without  sufficient  capital,  may  purchase 
$50,000  bonds  from  Scott,  and  sell  them  almost  immediately 
to  Hall,  making  a  profit  or  commission  on  the  transaction. 
He  is  not  able  to  pay  Scott  for  the  bonds  and  he,  therefore, 
employs  his  bank,  or  possibly  some  other  broker,  to  pay  for 
and  receive  the  bonds,  and  then  make  delivery  to  Hall;  the 
difference  between  the  purchasing  and  selling  price,  less  the 
clearing  charges,  to  be  paid  to  the  broker.  This  is  called 
"  clearing."  At  the  time  of  purchasing  bonds  a  broker  may 
say  to  the  seller:  "  Jones  &  Co.  will  clear  these  bonds  for  me," 


MONEY    AND    INVESTMENTS  81 

meaning  that  the  seller  will  make  delivery  of  the  bonds  to 
Jones  &  Co.  for  the  broker's  account;  the  broker  in  the 
meantime  instructing  Jones  &  Co.  as  to  the  transaction. 

Many  firms  make  a  specialty  of  "  clearing  "  securities  for 
other  brokers,  the  usual  charge  for  this  work  being  about 
$2.00  for  each  100  shares  of  stock  or  for  each  $10,000  in  bonds. 

The  most  common  use  of  this  term  is  in  connection  with  the 
"  clearing-house "  (to  which  refer)  system  by  which  "  to 
clear"  is  understood  to  pass  through  it;  i.e.  the  collection 
of  a  check  or  other  item  through  the  medium  of  the  associa- 
tion; or  the  general  settlement  for  the  day  of  a  bank's  accounts 
in  this  manner. 

Clearance  (or  Clearances).  Meaning  the  same  as  "  clear- 
ings." 

Clearers.  An  English  term  for  the  clerks  who  transact  the 
"  clearing-house  "  business  for  their  banks. 

Clearing-House.1  Let  us  take  Boston2  for  example.  A 
given  bank  receives  through  its  course  of  business  each  day 

1  The  Supreme  Court  of  Pennsylvania  has  defined  a  clearing-house  after 
this  manner:    "It  is  an  ingenious  device  to  simplify  and  facilitate  the 
work  of  the  banks  in  reaching  an  adjustment  and  payment  of  the  daily 
balances  due  to  and  from  each  other  at  one  time  and  in  one  place  on  each 
day.    In  practical  operation  it  is  a  place  where  all  the  representatives  of 
the  banks  in  a  given  city  meet,  and,  under  the  supervision  of  a  competent 
committee  or  officer  selected  by  the  associated  banks,  settle  their  accounts 
with  each  other  and  make  or  receive  payment  for  balances  and  so  '  clear  ' 
the  transactions  of  the  day  for  which  the  settlement  is  made." 

The  above  is  taken  from  James  G.  Cannon's  most  complete  work  on 
clearing-houses,  from  which  the  writer  has  obtained  much  valuable  as- 
sistance, and  to  which  the  reader  is  referred  for  all  information  in  relation 
to  the  "  clearing-house  "  plan,  and  to  forms  of  printed  blanks  used  by  the 
different  associations.  The  writer  is  also  greatly  indebted  to  Charles  A. 
Ruggles,  the  very  able  manager  of  the  Boston  Clearing-House,  for  many 
suggestions  touching  this  subject. 

Conant  says,  in  "The  Principles  of  Money  and  Banking  ":  "The  clearing 
system  is  a  development  of  a  principle  of  Roman  commercial  law  know  as 
compensatio  —  the  setting  off  of  a  debt  which  one  owes  to  another  by  a 
claim  against  him. 

"  This  system  attained  a  high  degree  of  perfection  in  the  Middle  Ages 
at  the  fairs  of  Lyons.  Under  an  ordinance  of  Louis  XI.  (March  8,  1463) 
four  fairs  were  authorized  at  stated  intervals  in  each  year,  each  of  which 
was  followed  by  a  day  of  settlement  fixed  at  the  fair  next  preceding. 
Every  banker  came  to  these  settlements  prepared  with  a  balance-sheet 
of  his  debts  and  credits.  Three  steps  were  required  in  completing  settle- 
ments; first,  the  acceptance  of  bills  by  those  upon  whom  they  were  drawn. 
This  was  necessary,  as  Vigne  points  out,  in  order  to  determine  what  items 
could  actually  be  cleared.  Then  came  the  comparison  of  accounts  and 
finally  the  settlement  in  money,  of  which  very  little  was  ultimately  re- 
quired." 

2  Although  Boston  has  been  chosen  as  an  example  to  set  forth  the 
clearing-house  principle,  it  does  not  necessarily  follow  that  the  details  are 
alike  in  the  different  clearing-houses  of  the  country  or  the  world.     The 
principle,  however,  remains  the  same,  there  being  no  essential  difference 
in  the  accomplishment  of  the  exchanges. 


82  MONEY    AND    INVESTMENTS 

a  great  many  checks,  which  are  payable  at  various  other 
banks  in  the  city.  To  collect  all  these  checks  by  a  process  of 
presentation  at  each  bank  would  be  a  slow  and  tedious  affair. 
In  order  to  simplify  this  process  of  collection,  a  u  clearing- 
house "  is  established  —  a  place  where  at  a  given  hour  of 
each  business  day  some  one  person  from  each  of  the  banks 
come  together  and  there  adjust  the  differences  through  the 
medium  of  the  "  clearing-house."  Each  bank's  representative 
receives  the  checks  against  it,  held  by  all  the  other  banks, 
the  total  of  which  shows  what  that  bank  owes  the  "  clearing- 
house." If  the  amount  of  the  checks  which  this  bank  holds 
against  others  is  greater  in  sum  than  the  total  amount  held 
against  itself,  there  is  a  balance  due  it  from  the  "  clearing- 
house," and,  therefore,  it  is  called  a  "  creditor  bank,"  and  will 
be  paid  the  sum  due  by  the  "  clearing-house."  If  the  aggre- 
gate amount  of  what  it  owes  is  greater  than  the  amount  of 
checks  which  such  bank  holds  against  the  others,  then  it  owes 
the  "  clearing-house,"  and  it  is  a  "  debtor  bank,"  in  which 
event  it  must  pay  to  the  "  clearing-house,"  the  amount  for 
which  it  is  debtor.  It  will  be  seen,  therefore,  at  the  close  of 
the  "  clearing-house  "  transactions  for  the  day,  that  the  total 
amount  of  debits  will  just  offset  the  credits;  the  "  clearing- 
house "  merely  acting  as  a  medium  for  settlement. 

An  association  of  this  kind  is  formed  so  that  banks  may 
avoid  not  only  the  tedious  collecting  of  checks,  drafts,  etc., 
from  bank  to  bank,  but  also  the  handling  of  such  enormous 
amounts  of  money  such  a  cumbersome  method  would  neces- 
sitate, and  the  risk  involved  in  so  doing. 

The  value  of  the  "  clearing-house  "  plan  may  be  appreciated 
by  the  fact  that  the  "  clearings  "  (i.  e.  the  amount  of  the 
checks,  drafts,  etc.,  passing  through  the  association)  of  New 
York  City  alone  are  estimated  to  have  averaged  for  the  past 
ten  years  over  fifty-eight  billions  of  dollars  annually.  Imagine 
handling  in  actual  money  such  vast  sums.  It  is  many  times 
more  than  the  total  money  in  circulation  in  the  whole  country. 
Up  to  September  1,  1905,  there  has  passed  through  the  New 
York  Clearing-House  since  its  inception  in  1853  the  enormous 
total  of  $1,703,425,193,728.60. 

A  good  illustration  of  the  economy  in  the  handling  of  money 
is  the  case  of  a  New  York  bank  which  recently  "  cleared  " 
checks  to  the  amount  of  more  than  $18,000,000,  yet  when 
the  credits  and  debits  were  balanced  the  whole  difference 
was  evened  up  by  a  payment  of  only  12  cents. 

The  expenses  of  the  "  clearing-house  "  are  shared  among 
the  banks,  and  a  bank  must  be  a  member  of  the  "  clearing- 
house association  "  to  enjoy  its  full  privileges. 

Trust  companies  may  or  may  not  be  members  of  thef 
association,  according  to  the  particular  "  clearing-house/ 


MONEY    AND    INVESTMENTS  83 

and,  in  the  latter  event,  they  generally  arrange  to  collect  their 
own  checks;  i.  e.  "  clear,"  through  some  bank  which  is; 
viz.:  each  will  deposit  its  checks  at  some  one  given  bank, 
which  will  put  them  through  the  "  clearing-house." 

Checks  received  by  a  bank  in  favour  of  one  of  its  depositors 
drawn  by  another  do  not,  of  course,  pass  through  the  "  clear- 
ing-house." 

The  "  clearing-house  "  idea  was  adopted  in  England  toward 
the  end  of  the  eighteenth  century,  and  one  was  established 
in  New  York  October,  1853. 

There  are  (January,  1907)  110  of  these  associations  in  the 
United  States,  and  new  ones  starting  at  frequent  intervals. 

(See  also  "  Non-Member  Bank.") 

Clearing-House  Agent.  It  is  first  necessary  to  understand 
the  matter  under  "  Clearing-House."  The  particular  bank 
clearing  for  a  non-member  bank  is  the  latter's  "  clearing- 
house agent." 

Clearing-House  Balance.  (First  read  "  Clearing-House.") 
The  actual  amount  of  money  needed  to  settle  the  difference 
between  the  banks  upon  any  one  day  is  referred  to  as  the 
"  clearing-house  balance." 

This  "  clearing-house  balance  "  namely  the  amount  due 
the  "  clearing-house  "  from  a  "  debtor  bank,"  or  the  amount 
due  from  the  "  clearing-house  "  to  a  "  creditor  bank  "  is 
settled  in  different  ways,  according  to  the  custom  of  the 
several  "  clearing-houses."  First,  it  may  be  in  part  accom- 
plished by  the  loaning  of  the  balances  between  the  banks 
themselves,  for  an  understanding  of  which,  see  "  Clearing- 
House  Rates." 

Second,  settlement  may  be  made  by  the  manager  of  the 
"clearing-house"  drawing  checks  in  favour  of  the  "creditor 
banks  "  against  the  "  debtor  banks." 

Third,  the  use  of  "  certificates,"  so-called,  which  are  of 
two  kinds: 

a.  "  Clearing-house    loan   certificates "  (to    which   subject 
refer). 

b.  "  Clearing-house     gold     certificates "     issued    by    the 
clearing-house  (or  similar  certificates  issued  by  a  United  States 
Sub-treasury),  being  receipts  of  denominations  of  $5,000  and 
$10,000' against  gold  on  deposit,  and  acceptable  only  between 
members  of  the  association.    Gold  equal  in  amounts  to  certif- 
icates outstanding  is  held  at  all  times.     Also  called  "  clearing- 
house-certificates." 1 

1  Formerly  these  certificates  were  issued  against  deposits  other  than 
gold,  but  such  is  not  now  the  case,  as  will  be  seen  by  the  following  excerpt 
from  a  letter  from  Mr.  James  G.  Cannon,  author  of  "  Clearing-Houses:  " 

"  Certificates  are  never  issued  against  silver.  There  have  been  times 
in  the  past  when  they  have  been  issued  against  legal  tenders,  but  that  waa 


84  MONEY    AND    INVESTMENTS 

Fourth,  by  drawing  a  draft  on  a  bank  in  another  city.  For 
instance,  settlements  at  the  "  clearing-house  "  in  Rochester, 
N.  Y.,  might  be  effected  by  checks  drawn  on  banks  in  New 
York  City. 

Fifth,  gold  coin,  gold  certificates  and  legal  tender  notes; 
but  silver  and  silver  certificates  are  only  used  under  a  mutual 
agreement  among  the  members  to  make  payments  in  amounts 
less  than  denominations  of  the  gold  coin  or  gold  certificates. 

Clearing-House  Balances.  By  reading  the  last  subject,  it 
will  be  seen  that  "  balance  "  refers  to  a  transaction  between 
the  "  clearing-house  "  and  one  bank.  "  Balances  "  has  refer- 
ence to  the  amount  necessary  to  settle  the  differences  between 
all  the  banks  "  clearing  "  through  a  given  association. 

Clearing-House  Certificates.  See  paragraph  "  b  "  under 
"  Clearing-House  Balance." 

Clearing-House  Gold  Certificates.  Certificates  issued  against 
a  deposit  of  gold,  as  explained  under  "  Clearing-House  Bal- 
ance," paragraph  "  b." 

Clearing-House  Loan  Certificate.  Issued  by  the  "  clearing- 
house "  (it  would  be  well  to  read  that  subject)  to  some  member 
of  the  association,  showing  the  deposit  with  the  "  clearing- 
house "  of  approved  securities,  such  certificates  being  negoti- 
able only  between  members  of  the  clearing-house  association. 
They  are  issued  only  during  times  of  financial  distress,  and 
up  to  only  a  certain  percentage  of  the  face  value  of  the  de- 
posited securities,  say  75%. 

An  instance  was  that  of  1893 *  when  the  scarcity  of  actual 
money  in  Boston  for  the  transaction  of  business  was  so  great 
that  a  form  of  money  had  tp  be  temporarily  created.2 

The  banks  had  plenty  of  good  securities  on  hand,  but  it  was 
impossible  to  convert  them  into  cash,  as  money  was  so  scarce 

a  long  while  ago,  and  now  their  issue  is  only  permitted  against  deposits  of 
gold.* 

1  The  N.  Y.  Clearing-House  first  issued  certificates  in  1860,  also  during 
1861,  1862,  1863  and  1867;   again  in  1873,  1884,  1890  and  1893. 

2  Cannon  declares  that  these  "  certificates  "  are  not  in  any  sense  to  be 
regarded  as  currency.    They  are  not  even  seen  by  the  business  community 
and  do  not  pass  from  bank  to  bank,  except  in  payment  of  "  clearing-house 
balances." 

And  that  "  the  great  value  of  clearing-house  loan  certificates  consists 
in  the  fact  that  they  take  the  place  of  money  in  settlements  of  the  clearing- 
house, and  hence  save  the  use  of  so  much  actual  cash." 

But  he  shows  that  the  Atlanta  Clearing-House  Association  in  1893  and 
likewise  clearing  associations  in  other  Southern  cities,  issued  these  certifi- 
cates in  small  denominations,  as  low  as  $1.00.  The  wording  on  the  Atlanta 
certificate  being  in  part,  "  Will  be  received  on  deposit  or  in  payment  of 
debts  due  any  bank  in  said  clearing-house."  And,  to  quote  Mr.  Cannon, 
"  an  implication  that  they  were  used  in  general  circulation,  which  in- 
deed, is  true."  This  use  as  money,  however,  was  entirely  confined  to  the 
South. 


MONEY    AND    INVESTMENTS  85 

that  there  was  no  method  of  obtaining  payment  for  the 
securities  in  case  of  their  sale,  which,  in  any  event,  would 
necessarily  have  been  at  a  sacrifice.  As  the  securities  had  a 
value,  and  as  "  clearing-house  loan  certificates  "  would  be 
accepted  among  the  members  of  the  association  in  lieu  of  cash, 
a  temporary  substitute  was  obtained,  by  such  of  the  member 
banks  as  desired,  depositing  their  approved  securities,  accom- 
panied by  their  own  interest-bearing  (7  3-10%)  obligations, 
and  receiving  in  return  certificates  showing  the  deposits.  Not 
only  did  this  furnish  a  substitute  for  money,  but  tided  over 
many  weak  banks  which  otherwise  would  have  met  disaster. 

As  the  financial  distress  gradually  is  replaced  by  a  feeling 
of  confidence,  and  money,  which,  for  the  time  being,  has  been 
hoarded  by  the  general  public,  comes  back  into  circulation, 
"  clearing-house  loan  certificates "  are  gradually  retired, 
and  the  deposited  securities  returned  to  their'  proper  owners. 

The  necessity  for  issues  of  certificates  of  this  class  in  panicky 
times  may  not  occur  in  the  future,  for  some  bankers  are  of  the 
opinion  that  the  Secretary  of  the  Treasury's  recent  arrange- 
ment of  advancing  money  against  engagements  of  gold  by 
importing  banks  would  give  such  immediate  use  of  gold  in 
this  country,  that  importations  of  the  metal  would  occur  to 
relieve  the  stress  in  preference  to  the  issuing  of  "  clearing- 
house loan  certificates." 

There  has  been  no  necessity  for  these  certificates  in  Europe 
because  of  the  "  greater  concentration  of  banking  capital 
there;  "  although  from  time  to  time  the  larger  banks  have 
come  to  the  assistance  of  the  smaller  ones. 

Clearing-House  Loans.    See  "  Clearing-House  Rates." 

Clearing-House  Rates.  First  read  "  Clearing-House."  After 
"  clearing  "  some  of  the  "  creditor  banks  "  will  often  desire 
to  loan  all  or  part  of  the  money  due  them  in  the  clearing- 
house settlement,  of  which  opportunity  to  borrow  other  banks 
may  avail  themselves.  The  rate  of  interest  on  loans  made  at 
such  time  is  called  the  "  clearing-house  rate  "  and  the  money 
available  for  loaning  in  the  hands  of  a  "  creditor  bank  "  is 
its  "  clearing-house  balance."  This  is  also  sometimes  referred 
to  as  "  balance  between  banks." 

The  custom  prevails  in  Boston  of  making  clearing-house 
loans  on  "  certificates  of  deposits."  To  illustrate:  if  the  Corn 
National  Bank  loans  $100,000  to  the  Wheat  National  Bank, 
it  will  receive  the  latter's  certificate  of  deposit  for  the  amount, 
in  lieu  of  a  note.  It  is  expected  upon  the  following  day  that 
this  certificate  may  be  charged  back  again  to  the  borrowing 
bank  through  the  medium  of  the  clearing-house.  Such  loans, 
therefore,  are  commonly  made  from  day  to  day  only.1 

1  This  custom  of  loaning  money  at  the  "  clearing-house  "  between  banks 
seems  to  be  purely  a  Boston  practice.  At  the  present  time  it  is  done  to  a 


86  MONEY    AND    INVESTMENTS 

Clearing-House  Settlement.  When  a  bank's  representative 
has  attended  to  his  clearing-house  duties  for  the  day,  and 
payment  has  been  made  to,  or  received  from,  the  "  clearing- 
house," the  "  clearing-house  settlement  "  for  that  bank  has 
been  effected. 

It  is  the  adjustment  of  one  bank  with  all  the  other  banks  of 
the  association  of  the  amounts  due  each  other  through  the 
medium  of  the  "  clearing-house,"  payment  being  received, 
or  made,  in  accordance  with  amounts  due. 

Clearing-House  Sheet.  (Read  "  Clearing-House.")  The 
sheet  on  which  the  total  amount  of  checks,  etc.,  which  a 
bank  holds  against  all  the  other  banks  of  the  clearing-house, 
or  against  those  which  clear  through  members  of  the  associa- 
tion, is  entered,  at  the  close  of  each  business  day.  This  sheet 
is  presented  with  the  checks  (which  are  exchanged  with  the 
other  banks)  the  following  business  day  —  that  being  the 
usual  custom  —  at  the  clearing-house. 

Clearing-House  Statement.    See  "  Bank  Statement." 

Clearing-House  Stocks.  Stocks  which  may  be  "  cleared  " 
through  the  "  stock  exchange  clearing-house,"  to  which 
subject  reference  may  be  had. 

Clearing-Matter.  All  the  checks,  drafts,  etc.,  which  a  bank 
presents  at  the  "  clearing-house." 

Clearings.  The  amount  of  checks,  drafts,  etc.,  passing 
through  the  process  of  collection  during  any  given  time. 
(See  "  Clearing-House.")  The  sum  total  of  the  collections 
as  accomplished  through  the  medium  of  the  New  York  Clear- 
ing-House Association  for  any  one  day  are  recognized  as  the 
"  clearings  "  for  that  city  for  that  day.  "  Clearance  "  or 
"  clearances  "  may  be  used  with  this  same  meaning. 

The  manager  of  the  New  York  Clearing-House  Association 
gives  the  clearings  for  the  year  ending  December  31,  1906,  for 
New  York  City  alone,  as  $104,675,828,656,  and  for  the  United 
States  as  a  whole,  $159,808,640,986.  This  shows  the  impor- 
tance of  New  York  from  the  standpoint  of  its  clearings. 
London  is  the  next  city  of  importance  in  the  world,  and  for 
1905  the  total  of  both  "  out-of-town  "  and  "  city  clearings  " 
for  London  amounted  to  £12,711,334,000  ($61,859,706,911). 

Clique.  A  number  of  persons  whose  interests  lie  in  the 
same  direction,  and  who  unite  in  their  efforts  to  accomplish 
a  certain  result.  In  stock  exchange  parlance,  a  "  bear  clique," 
for  instance,  is  a  group,  the  members  of  which  desire  a  decline 
in  prices  and  use  their  best  efforts  towards  that  end. 

The  difference  between  a  "  pool  "  (to  which  subject  refer) 

very  much  less  extent  than  ten  years  ago.    Some  banks  have  made  no 
practice  of  it  for  several  years,  but  still  the  custom  exists. 


MONEY    AND    INVESTMENTS  87 

and  a  "  clique  "  is  but  slight.  In  the  matter  of  a  "  pool  " 
there  is  generally  some  written  or  verbal  agreement  among  its 
members  for  the  purpose  of  accomplishing  certain  results, 
whereas,  a  "  clique  "  is  composed  of  persons  whose  interests 
lie  in  the  same  direction,  and  who  work  to  a  common  end 
without  any  pre-arranged  agreement. 

Close  Corporation.  A  stock  company  whose  shares  and 
management  are  in  the  hands  of  a  few  persons,  and  the  stock 
of  which  is  seldom,  if  ever,  publicly  offered. 

Closed.  The  settlement  of  an  account.  In  speculative 
language,  the  expression  is  used,  "  the  account  is  closed." 
Suppose,  for  instance,  the  speculator  has  been  buying  and 
selling  Union  Pacific  stock,  running  a  marginal  account  with 
his  broker  (see  "  Margin  ")  and  finally  ends  the  transaction 
by  buying  or  selling,  as  the  case  may  be,  and  receives  from 
the  broker  his  profits,  if  any;  then  that  account  is  closed. 

Other  meanings  are  transaction  or  trade  completed  and  also- 
"  books  close,"  which  subject  see. 

Closed  Mortgage.  A  mortgage  under  which  no  more  in- 
debtedness can  be  incurred;  the  amount  of  indebtedness 
authorized  under  the  terms  of  the  mortgage  has  been  reached. 

Closed  Out.    All  sold. 

Close  Money.  Money  rates  fairly  high,  and  loans  not  easily 
obtained. 

Close  Out.    Means  to  sell. 

Close  Prices.  Changes  in  prices  by  small  fractions;  or  a 
difference  between  the  bid  and  asked  price  of  but,  say,  1-8%. 

Closing  Prices.  The  quotation  of  the  day's  last  sale  of  each 
security. 

Clover  Leaf.  The  Toledo,  St.  Louis  &  Western  R.  R.  Co. 
The  name  "  Clover  Leaf  "  was  suggested  by  some  imaginary 
resemblance  of  the  three  States  in  which  this  road  is  located  — 
Ohio,  Illinois  and  Indiana  —  to  a  clover  leaf. 

CLT.    The  "  ticker  "  abbreviation  for  "  collateral  trust." 

CMP.    The  "  ticker  "  abbreviation  for  "  compromise." 

CN.  The  "  ticker  "  abbreviation  for  "  consolidated  "  or 
"  consols." 

Coalers.  The  railways  which  do  most  of  the  anthracite  coal 
transportation  of  the  country;  many  of  which  have  large  coal 
mining  interests  of  their  own.  Some  of  the  most  prominent 
of  the  coal  roads  are  the  Delaware,  Lackawanna  &  Western, 
Central  R.  R.  of  New  Jersey,  Lehigh  Valley,  Reading,  etc. 
(See  "  Hard  Coalers  "  and  "  Soft  Coalers.") 

Coal  Roads.    See  "  Coalers." 


88  MONEY    AND    INVESTMENTS 

C.  0.  D.  Cash  (or  collect)  on  delivery.  To  be  more  explicit, 
the  delivery  of  the  goods  will  not  be  made  except  in  exchange 
for  the  amount  due. 

Code.    See  "  Cipher  Code." 

Coffee.  See  "  Futures  "  and  "  Spot,"  which  methods  of 
trading  are  customary  in  "  coffee."  The  trading  unit  is  250 
bags,  each  weighing  about  130  pounds.  Fluctuations  are  re- 
corded on  the  basis  of  l-20th  of  a  cent  per  pound,  which 
equals  five  points,  i.  e.  $16.25  on  a  250  bag  transaction.  One 
cent  per  pound  equals  $325  on  the  same  amount.  The 
commission  charged  non-members  of  the  Coffee  Exchange  of 
the  City  of  New  York  is  $20  for  "buying  and  selling" 
250  bags,  or,  as  it  is  termed,  "  $20  per  contract."  The  charge 
for  members  of  the  Exchange  is  $10  for  the  same  transac- 
tion. The  "  margin  "  required  under  the  rules  is  50  cents  to 
$2.00  per  bag;  the  usual  "  margin  "  being  $1.00. 

Coin  Certificates.  Paper  money  specifically  repayable  in 
coin,  such  as  our  "  gold  treasury  certificates  "  and  "  silver 
treasury  certificates." 

Coin  Notes.  "  Treasury  notes  of  Act  of  July  14,  1890  " 
are  sometimes  called  "  coin  notes." 

Coins.  Pieces  of  money  of  a  fixed  weight,  stamped  by  the 
authority  of  government,  and  employed  as  a  circulating 
medium;  or,  as  Jevons  defines  them,  "  ingots  of  which  the 
weight  and  fineness  are  certified  by  the  integrity  of  designs 
impressed  upon  the  surfaces  of  the  metal."  Their  value  may 
be  represented  by  the  material  of  the  coins,  or  may  depend  to 
a  greater  or  less  extent  on  the  credit  of  the  State.1 

Col.  or  (Coll.).    Collateral. 

Collateral.  Really  "  collateral  security."  This  is  a  security 
for  the  performance  of  agreements,  or  for  the  payment  of 
money,  and  is  something  deposited  with  the  evidence  of  debt 
to  satisfy  the  claim  of  the  lender  in  case  of  failure  on  the  part 
of  the  borrower  to  meet  the  indebtedness  when  due.  For 
example,  Prescott  &  Co.  desire  to  borrow  $100,000,  and  to 
facilitate  the  operation  agree  to  deposit  with  the  bank  which 
is  to  loan  them  the  money,  bonds  or  stocks  of  known  value, 
and  acceptable  to  the  bank,  having  a  market  value  of,  say, 
$120,000;  being  salable  at  the  time  of  loan  for  about  $207000 
more  than  the  amount  borrowed.  This  $20,000  is  called  the 
"  margin."  Suppose  the  market  value  of  these  securities 
declines  to  $100,000.  By  agreement,  the  bank  could  demand 
Prescott  &  Co.  to  either  pay  off  part  of  the  loan,  or  deposit 
additional  security  equivalent  to  the  decline  in  the  market 
value  of  the  collateral.  If  this  is  not  forthcoming  the  lender 

1 1896  Report  of  the  Director  of  the  Mint. 


MONEY    AND    INVESTMENTS  89 

has  the  right  to  make  a  public  sale  of  the  securities;  it  being 
immaterial  whether  the  loan  is  a  "  demand  "  or  "  time  loan." 

If,  when  the  loan  matures,  Prescott  &  Co.  are  unable  to  pay 
it,  the  bank  would  have  the  right  to  sell  the  collateral,  and 
from  the  proceeds  first  deduct  the  amount  due  for  principal 
and  interest;  the  balance,  if  any,  it  would  pay  back  to 
Prescott  &  Co.  In  the  case  of  a  loan  upon  collateral  security, 
therefore,  the  value  and  character  of  the  collateral  is  the  first 
consideration.  A  loan  may  be  made  with  reasonable  safety 
to  a  firm  of  even  comparatively  unknown  reputation,  if  it  is 
able  to  deposit  security  of  established  and  well-known  value, 
whereas,  in  the  case  of  loans  made  without  collateral,  the 
financial  standing  and  condition  of  the  borrower  must  be  the 
main  consideration.  Twenty  per  cent,  is  about  the  usual 
margin  required. 

Wool  dealers  often  borrow  money  against  wool,  which,  in 
that  case,  is  security;  so,  likewise,  in  other  kinds  of  business, 
similar  loans  are  made. 

Loans  on  "  collateral  "  are  usually  made  on  "  call,"  as 
explained  under  "  Demand  Loan,"  but  are,  nevertheless, 
frequently  made  on  time,  for  thirty,  sixty,  or  ninety  days, 
or  even  six  months  or  a  year.  If  they  are  made  in  this  manner 
the  time  is  usually  for  six  months  or  less.  They  may  be  either 
"  discounted  "  or  made  with  interest  payable  at  maturity, 
as  the  case  may  be.  The  borrower  usually  has  the  privilege 
of  substituting  collateral  for  that  already  pledged;  that  given 
in  exchange,  however,  must  always  be  satisfactory  to  the 
lender.  In  case  of  investment  bankers,  securities  are  changing 
from  time  to  time  as  they  buy  and  sell,  or  in  the  case  of  a  stock 
broker  who  is  buying  and  selling  for  his  clients,  the  privilege 
of  exchanging  collateral  is  very  necessary.  In  such  an  ex- 
change as  this,  the  borrower  usually  hands  in  with  his  new 
collateral  an  "  Exchange  of  Collateral  "  slip,  which  describes 
the  new  security  pledged  as  well  as  that  withdrawn. 

By  the  above  it  will  be  seen  that  collateral  loans  may  be 
known  as  "  demand  collateral  paper  "  or  "  time  collateral 
paper." 

Form  for  a  "  Demand  Collateral  Note: " 

9,000  Dolls Cts.  SPRINGFIELD  MASS.,  Jan.  3,  1906. 

ON  DEMAND,  for  value  received,  with  interest  at  the  rate  of  5  per  cent, 
per  annum  I  promise  to  pay  to  The  Cattlemen's  National  Bank,  or  order,  at 
its  Banking  Rooms,  Nine  Thousand  -ffa  Dollars,  I  having  deposited  with 
said  Bank,  as  General  Collateral  Security  for  the  payment  of  this  and  any 
other  liability,  direct  or  indirect,  of  the  undersigned  to  said  Bank,  now 
contracted  or  hereafter  to  be  contracted,  the  following  property,  viz.:  100 
Shares  Mountain  Manufacturing  Company  Stock,  with  authority,  on  the 
non-payment  of  any  such  liability,  to  sell  and  transfer,  at  any  time  or  times, 
said  property,  or  any  part  thereof,  at  "  Brokers'  Board  "  or  at  public  or 
private  sale,  without  notice;  and  the  said  Bank,  or  any  of  its  officers, 


90  MONEY    AND    INVESTMENTS 

may  become  purchasers  at  any  such  sale,  if  public,  or  at  Brokers'  Board; 
and  any  property  substituted  for  the  above,  or  added  thereto,  shall  be  also 
covered  by  this  agreement.  A  margin  satisfactory  to  the  holder  or  holders 
hereof  to  be  kept  good  at  all  times,  and  this  note  shall  be  deemed  to  be  due 
and  payable  immediately,  anything  hereinbefore  expressed  to  the  con- 
trary notwithstanding,  on  my  failure  to  make  such  margin  good  upon 
demand  by  the  holder  or  holders  hereof,  and  they  may  immediately  re- 
imburse themselves  by  sale  of  the  security. 

After  deducting  costs  and  expenses  of  collection  and  sale,  the  residue  of 
the  proceeds  of  any  such  sale  or  sales  may  be  applied  to  the  payment  of 
any  then  existing  liability  of  the  undersigned  to  said  Bank,  whether  then 
due  or  not,  returning  the  overplus  to  the  undersigned. 

FRANK  CASTLEMAN. 
Form  for  a  "  Time  Collateral  Note:  " 

9,000  Dolls Cts.  SPRINGFIELD,  MASS.,  Jan.  3,  1906. 

Six  MONTHS  after  date,  for  value  received,  I  promise  to  pay  to  The  Cattle- 
men's National  Bank,  or  order,  at  its  Banking  Rooms,  Nine  Thousand  -ffo 
Dollars,  I  having  deposited  with  said  Bank,  as  General  Collateral  Security 
for  the  payment  of  this  and  any  other  liability,  direct  or  indirect,  of  the 
undersigned  to  said  Bank,  now  contracted  or  hereafter  to  be  contracted, 
the  following  property,  viz.:  100  Shares  Mountain  Manufacturing  Com- 
pany Stock,  with  authority,  on  the  non-payment  of  any  such  liability,  to 
Bell  and  transfer,  at  any  time,  said  property,  or  any  part  thereof,  at  Brokers' 
Board  or  at  public  or  private  sale,  without  notice;  and  the  said  Bank,  or 
any  of  its  officers,  may  become  purchasers  at  any  such  sale,  if  public,  or 
at  Brokers'  Board ;  and  any  property  substituted  for  the  above,  or  added 
thereto,  shall  be  also  covered  by  this  agreement.  A  margin  satisfactory 
to  the  holder  hereof  to  be  at  all  times  kept  good,  in  default  of  which  after 
demand,  this  obligation  shall  become  due  and  payable  on  demand. 

After  deducting  costs  and  expenses  of  collection  and  sale,  the  residue  of 
the  proceeds  of  any  such  sale  or  sales  may  be  applied  to  the  payment  of  any 
then  existing  liability  of  the  undersigned  to  said  Bank,  whether  then  due 
or  not,  returning  the  overplus  to  the  undersigned. 

FRANK  CASTLEMAN. 

Collateral  and  Participating  Bond.  A  very  uncommon  issue. 
The  illustration  given  under  "  Participating  Bond  "  will  apply 
in  this  case. 

Collateral  Income  Bonds.  An  "  income  bond  "  secured  by 
collaterals.  (See  "  Income  Bonds.") 

Collateral  Loan.  The  obligation  or  promise  to  pay  of  an 
individual,  firm,  or  corporation,  on  demand  or  maturing  in  a 
year  or  less  time,  and  which  individual,  firm,  or  corporation 
has  deposited  with  the  holder  of  the  note,  stocks,  bonds,  or 
other  securities,  which,  in  case  of  the  note  not  being  paid  when 
due,  may  be  sold  by  the  holder  of  the  note  and  so  much  of  the 
proceeds  of  the  same  as  may  be  necessary  to  satisfy  the  debt 
retained  by  the  lender,  and  the  balance,  if  any,  returned  to 
the  borrower.  (See  "  Collateral.") 

Collateral  Mortgage  Bond.  (Read  "  Collateral  Trust 
Bonds.")  A  "  collateral  mortgage  bond,"  technically,  should 
be  secured  by  a  deposit  of  bonds  in  turn  secured  by  mortgage. 
But  this  title  has  been  much  abused,  and  bonds  issued  with 


MONEY    AND    INVESTMENTS  01 

such  a  title  frequently  are  secured  by  stocks  only,  as  was  the 
case  recently  with  a  large  Western  railway  company  (Holding 
Company)  which  authorized  an  issue  of  $75,000,000  "  col- 
lateral mortgage  gold  bonds  "  secured  by  a  pledge  of  nothing 
but  the  stock  of  another  railway  company. 

Collateral  Note.  A  promissory  note  secured  by  stocks, 
bonds,  mortgages,  or  other  securities.  A  "  collateral  note," 
of  course,  may  be  given  by  an  individual,  firm,  or  corporation. 
(See  "  Collateral.")  It  is  quite  a  common  form  of  borrowing 
among  many  of  the  railway  companies,  as  evidenced  by  the 
Cincinnati,  Hamilton  &  Dayton  Railway  Co.  issuing,  in  1905, 
$15,000,000  4£%  "  collateral  notes."  To  secure  these  notes 
there  was  deposited  with  the  Central  Trust  Company  of  New 
York,  as  trustee,  the  following  securities,  which  had  an 
estimated  market  value,  at  the  time,  of  $24,000,000. 

$15,000,000  Cincinnati,  Hamilton  &  Dayton  4£%  Consoli- 
dated Mortgage  Gold  Bonds. 

$6,700,000  Cincinnati,  Hamilton  &  Dayton  5%  Preferred 
Stock. 

$1,073,000  Cincinnati,  Hamilton  &  Dayton  4%  Preferred 
Stock. 

$375,000  bonds  of  constituent  companies. 

7,501  shares  Southwestern  Construction  Company  stock. 

Ascertain  the  value  of  securities  held  by  the  trust  company 
as  collateral  security  for  notes  of  this  description,  and  what 
their  nature  is  and  how  important  to  the  company  issuing 
the  "  collateral  notes." 

Collateral  Trust  Bonds.  Issued  by  a  corporation,  not  secured 
by  a  mortgage  upon  its  own  property,  unless  upon  certain 
real  estate  and  subject  to  previous  liens  thereon,  but  secured 
by  depositing  in  trust  securities  of  other  companies.  Such  a 
bond  may,  however,  be  indirectly  a  first  mortgage  through 
mortgages  which  have  been  deposited  as  above  indicated; 
for  instance,  under  the  heading  "  Joint  Bonds  "  is  described 
a  bond  issued  against  stock  of  the  Chicago,  Burlington  & 
Quincy  Railroad  Co.  In  this  case,  these  "  joint  bonds  "  are 
really  "  collateral  trust  bonds,"  and  are  in  no  sense  a  mort- 
gage. Suppose,  however,  some  of  the  first  mortgage  bonds  of 
the  Chicago,  Burlington  &  Quincy  Railroad  Co.  had  been 
deposited;  this  "  collateral  trust,"  or  "  joint  bond,"  would, 
in  that  case,  have  been  indirectly  a  first  mortgage  upon  the 
Chicago,  Burlington  &  Quincy  Railroad.1 

The  value,  as  an  investment,  of  such  a  bond  as  described 

1The  Armstrong  Committee,  in  its  recommendations  after  investi- 
gating the  New  York  life  insurance  companies,  expressed  disapproval  of 
collateral  trust  bonds  secured  by  stock  collateral.  "  Collateral  trust 
bonds  "  at  their  best  have  many  objectionable  points,  and  cannot  be 
classed  as  conservative. 


92  MONEY    AND    INVESTMENTS 

above,  depends  upon  two  things:  first,  the  value  of  the 
securities  pledged  for  its  payment,  and  their  desirability  if, 
through  default,  they  become  the  property  of  the  bondholders; 
second,  the  strength  and  ability  to  pay  of  the  corporation 
actually  issuing  the  bond  and  what  obligation,  if  any,  such 
corporation  is  under  to  pay  in  case  of  insecurity  of  the  col- 
lateral pledged.  (See  "  Convertible  Collateral  Trust  Bonds.") 

Collection  Charges.  Banks  belonging  to  the  New  York 
Clearing-House  Association  have  adopted  certain  rules  and 
regulations  covering  the  collection  of  checks,  etc.  Such  banks 
are  allowed  to  use  their  discretion  as  regards  charges  for 
collection  on  the  largest  Eastern  cities,  and  in  transactions 
with  the  City  and  State  of  New  York  and  the  government, 
but  the  remainder  of  the  United  States  is  divided  into  two 
sections,  in  which  charges  of  1-10  and  £  of  1%  are,  respectively, 
made.  Collections  on  points  east  of  the  Mississippi  River  and 
north  of  Tennessee  (also  including  the  State  of  Missouri)  are 
charged  for  at  the  rate  of  1-10  of  1%.  On  all  other  points  of 
the  United  States  (including  Canada  and  the  Provinces)  a 
charge  of  1-4  of  1%  is  made. 

Other  large  cities,  of  course,  have  their  own  customs.  The 
Chicago  banks  recently  adopted  a  plan  of  charges  for  the 
collection  of  out  of  town  checks.  This  is  modelled  somewhat 
after  the  St.  Louis  plan,  and  there  is  great  similarity  between 
these  and  the  New  York  method.  The  essential  point  is,  that 
the  custom  is  becoming  very  general  for  banks  to  charge  for 
the  collection  of  out  of  town  checks. 

Collection-Clerk.  This  employee  of  a  bank  is  responsible 
for  such  items  as  notes,  time  drafts,  etc.,  that  is,  papers  which 
are  payable  "  on  time."  Items  which  are  payable  "  on 
demand  "  do  not  as  a  rule  come  under  his  jurisdiction. 

Collection  Items.     See  "  Collections." 

Collection  of  Coupons.    See  "  Coupons  —  Collection  of." 

Collections.  The  "  clearing-house  "  term  indicating  the 
checks,  drafts,  etc.,  which  a  bank  presents  at  the  "  clearing- 
house," or  which  it  has  for  collection.  Also  referred  to  as 
"  collection  items." 

Colon.  Monetary  unit  of  Costa  Rica,  equal  to  $0.465  United 
States  money. 

Columbian  Half  Dollar.  By  an  act  of  Congress,  August  5, 
1892,  $2,501,052.50  of  silver  half  dollars,  of  special  design, 
were  minted  in  recognition  of  the  Chicago  World's  Fair. 
Weight,  192.9  grains;  fineness,  .900.  Legal  tender  to  the  extent 
of  $10. 

Columbian  Quarter  Dollar.  By  an  act  of  Congress,  March 
3,  1893,  $10,005.75  of  silver  twenty-five  cent  pieces,  of  special 


MONEY    AND    INVESTMENTS  93 

design,  were  minted  in  recognition  of  the  Chicago  World's 
Fair.  Weight,  96.45;  fineness,  .900.  Legal  tender  in  amounts 
not  exceeding  $10. 

Combine.  Practically  the  same  thing  as  a  "  trust,"  or  more 
particularly  a  "  pool."  Also,  a  stock  market  term  for  a  com- 
bination of  brokers  or  others  for  the  accomplishment  of  a 
certain  object. 

Commercial  Agencies.  In  New  York  the  head  offices  of  the 
two  principal  "  commercial  agencies  "  of  this  country; 
namely,  Bradstreet's  and  Dun's,  are  located.  These  agencies 
furnish  subscribers  periodically  with  books  in  which  may  be 
found  the  credit  standing  or  rating  of  practically  all  the 
business  men,  firms,  etc.,  who  would  probably  need  credit, 
not  only  throughout  the  United  States,  but  in  many  other 
parts  of  the  world  as  well.  These  publications  are  of  great 
value  to  the  banks,  manufacturers,  wholesalers,  and  others. 

The  amount  of  money  loaned,  or  goods  advanced,  is  gener- 
ally dependent  upon  the  rating  of  the  borrower  or  purchaser 
in  one  of  the  "  commercial  agencies."  The  agencies  will 
also  furnish  special  reports  to  subscribers  upon  any  person 
in  any  part  of  the  territory  covered.  Besides  all  this,  they 
furnish  general  information  to  the  public  regarding  the 
number  of  failures  during  a  certain  period,  crop  and  business 
conditions,  etc.  In  fact,  these  agencies  are  to-day  a  great 
factor  in  banking  and  mercantile  life. 

There  are  many  other  smaller  agencies  each  of  which  makes 
a  specialty  of  some  one  industry. 

The  first  mercantile  agency  was  created  in  New  York  in 
1841. 

Commercial  Banks.  In  several  States,  such  as  Kentucky 
and  Michigan,  there  are  banks  bearing  the  above  title.  They 
are  much  the  same  as  an  ordinary  "  bank  of  deposit."  The 
intent  is  not  so  much  for  the  deposit  of  savings,  but  more  the 
accepting  of  deposits  subject  to  check  to  facilitate  an  exchange 
of  commodities;  to  be  of  benefit  to  the  merchants  and  business 
men  in  general.  They  carry  on  the  usual  business  of  banking 
by  discounting  and  negotiating  notes,  drafts,  bills  of  ex- 
change, and  other  evidences  of  debt;  lending  money  on  real 
and  personal  security,  etc.  Their  functions  are  very  similar 
to  those  of  national  banks,  with  the  exception,  among  others, 
of  course,  that  they  do  not  issue  bank  notes. 

In  a  broad  sense,  national  banks,  and,  in  fact,  all  "  banks 
of  deposit  "  are  "  commercial  banks,"  but,  as  stated  above, 
in  certain  communities  there  are  those  specially  designated 
by  that  name. 

Commercial  Bar.    Explained  under  "  Assay  Office  Bar." 

Commercial  Bill.     A   draft,   accompanied   by   a   "  bill  of 


94  MONEY    AND    INVESTMENTS 

lading  "  and  a  certificate  of  marine  insurance,  drawn  by  a 
seller  in  one  country  against  a  buyer  in  another,  on  account 
of  goods  sold  the  latter.  These  drafts  are  usually  sold  by  the 
"  drawer  "  to  some  banking  house  dealing  in  foreign  exchange, 
as  by  so  doing  immediate  use  of  the  money  can  be  obtained. 

It  is  customary  for  the  "  drawer  "  of  a  "  commercial  bill  " 
to  make  it  payable  to  himself,  and  then  indorse  it  as  need  may 
arise;  unless  he  wishes  to  use  the  amount  due  him  directly  to 
offset  a  foreign  debt  of  his  own,  in  which  event  he  may  draw  the 
bill  in  favour  of  the  party  abroad  to  whom  the  sum  is  due. 

For  the  different  kinds  of  "  commercial  bills "  refer  to 
"  Demand  Bills  "  and  "  Time  Bills." 

Commercial  Borrowers.  Borrowers  of  money,  as  set  forth 
under  "  Commercial  Paper." 

Commercial  Discounts.  Notes  given  by  those  engaged  in 
commercial  enterprises  —  dry  goods,  hardware,  etc.,  —  upon 
which  the  interest  is  paid  in  advance  —  "  discounted  "  (see 
matter  under  "  Discount  ").  Sometimes  the  rate  of  "  dis- 
count "  is  meant  by  the  term  "  commercial  discount." 

Also,  the  discount  allowed  by  the  seller  of  merchandise  to 
the  purchaser  on  account  of  earlier  payment  than  called  for 
in  the  bill.  For  instance,  unless  otherwise  stipulated,  the 
wool  dealer  bills  a  sale  of  wool  as  "  net  sixty  days,  1%  ten 
days,"  meaning  that  the  bill  is  absolutely  due  and  payable  at 
the  end  of  sixty  days,  but  that  if  the  purchaser  chooses  to  pay 
it  before  the  expiration  of  ten  days  he  may  deduct  1%  from 
the  face  of  the  bill.  In  the  same  way,  in  cotton  yarn  trans- 
actions, the  bills  call  for  "  net  sixty  days,  2%  ten  days," 
and  so  on. 

Commercial  Letter  of  Credit.  See  last  part  of  "  Letter  of 
Credit." 

Commercial  Paper.  This  is  a  very  general  term  and  is 
made  in  usage  to  cover  many  kinds  of  notes,  acceptances,  bills 
of  exchange,  etc.  It  is  the  general  term  used  by  note  brokers, 
but  they  further  distinguish  between  the  various  kinds  of 
"  commercial  paper  "  by  referring  to  the  same  as  "  corpora- 
tion paper,"  "  business  paper,"  "  mercantile  paper,"  etc.,  as 
explained  under  the  several  subjects. 

Commission.  The  charge  made  by  any  banker  or  broker 
for  buying  or  selling  securities  for  some  one  else;  the  banker's, 
broker's,  or  promoter's  charge  for  services.  When  an  agent  or 
broker  sells  or  buys  a  security  for  another,  acting  as  a  "  middle- 
man," he  receives  a  commission  for  his  services.  In  other 
words,  he  is  "  commissioned  "  to  accomplish  a  certain  act. 
In  the  case  of  a  merchant  who  owns  goods  and  sells  the  same 
to  his  customers,  he  makes  a  "  profit,"  not  a  "  commission;  " 
the  distinction  between  a  "  profit  "  and  a  "  commission  " 


MONEY    AND    INVESTMENTS  95 

being,  that  in  the  case  of  the  former  there  is  no  "  middleman;  " 
that  is,  the  owner  sells  directly  to  the  purchaser;  the  difference 
between  the  buying  and  selling  price  being  the  "  profit." 
In  the  case  of  a  "  commission  "  when  securities  or  commodi- 
ties are  passed,  for  instance,  from  the  possession  of  the 
owner,  through  an  agent  or  broker,  to  a  third  party,  who  is 
the  buyer,  the  agent  or  broker  receives  a  compensation  for  his 
services,  called  a  "  commission." 

New  York  Stock  Exchange  Rules  for  Commission  Charges: 

"  All  commissions  shall  be  calculated  upon  the  par  value 
of  securities  and  the  rates  shall  be  as  follows: 

"  On  business  for  parties  not  members  of  the  Exchange, 
including  joint  account  transactions  in  which  a  non-member 
is  interested,  transactions  for  partners  not  members  of  the 
Exchange,  and  for  firms  of  which  the  Exchange  member  or 
members  are  special  partners  only,  the  commission  shall 
be  not  less  than  one-eighth  of  one  per  cent. 

"  On  business  for  members  of  the  Exchange,  the  commission 
shall  be  not  less  than  one-thirty-second  of  one  per  cent., 
except  when  a  principal  is  given  up,  in  which  case  the  commis- 
sion shall  be  not  less  than  one-fiftieth  of  one  per  cent. 

"  On  mining  shares  and  subscription  rights,  such  rates, 
to  members  and  non-members  as  may  be  determined,  from 
time  to  time,  by  the  Committee  on  Commissions,  with  the 
approval  of  the  Governing  Committee. 

"  Government  and  municipal  securities  are  exempted 
from  the  provisions  of  this  article." 

Transactions  in  bonds  on  the  New  York  Stock  Exchange 
are  made  without  regard  to  the  "  accrued  interest  "  (see  that 
subject).  On  the  Boston  Stock  Exchange,  interest  is  added 
to  the  price  of  the  bond  unless  otherwise  agreed  upon  or 
bonds  in  default  and  income  bonds.  This  results  in  the 
quotations  upon  the  two  Exchanges  varying,  to  a  greater  or 
lesser  degree,  for  the  same  bond,  as  it  is  natural  that  the 
equivalent  to  the  interest  accrued  should  be  added,  ap- 
proximately, to  the  New  York  quotation,  so  as  to  offset  the 
Boston  price. 

Commission  Broker.  An  agent  who  buys  and  sells  for 
others  for  a  commission. 

Commission  Buying.  Buying  of  securities  on  the  part  of 
investors  and  speculators  through  their  brokers,  to  whom 
commissions  are  paid;  in  contradistinction  to  buying  by 
bankers,  brokers,  and  members  of  the  stock  exchange  for 
their  own  accounts. 

Commission  House.  A  firm  dealing  in  securities  only  on  a 
commission  basis,  and  which  neither  speculates  on  its  own 
account  nor  buys  issues  outright  with  the  idea  of  selling  in 


96  MONEY    AND    INVESTMENTS 

smaller  lots  to  their  customers,  as  does,  for  instance,  the 
investment  banker. 

Commission  House  Paper.  A  note  given  or  sold  by  a  com- 
mission house,  such  as  one  handling  dry  goods. 

Commitments.  By  one's  "commitments"  is  understood 
his  contracts  or  obligations. 

Common  Carrier.  One  who  undertakes  for  hire  or  reward 
to  transport  the  goods  of  such  as  choose  to  employ  him, 
from  place  to  place.  All  transportation  companies  engaged 
in  the  express,  freight,  or  passenger  business  are  common 
carriers.  The  "  Rate  Bill "  which  has  recently  passed 
Congress  includes  under  this  heading  "  pipe-lines  "  for  the 
transportation  of  oil  or  other  commodity  except  water  or  gas. 

Common  Stock.  That  part  of  the  capitalization  of  a  com- 
pany upon  which  dividends  may  be  paid  only  after  satisfying 
the  requirements  of  the  floating  debt,  bonds,  and  "  preferred 
stock,"  if  any.  It  represents  the  speculative  ownership  in  a 
corporation,  as  a  rule.  At  times,  however,  the  earnings  of  the 
companies  are  so  large  that  the  "  common  stock  "  receives 
much  larger  dividends  than  the  preferred,  and  sells  at  much 
higher  prices.  When  the  earnings  of  a  company  very  largely 
increase  or  there  are  indications  of  some  profitable  "  deal," 
the  "  common  stock  "  is  apt  to  reflect  it  by  a  rise  in  price 
greater  than  the  other  securities  of  the  same  company. 

In  some  corporations  after  the  "  common  stock  "  has 
received  a  certain  rate  of  dividend,  there  is  a  division  of  all 
other  earnings  between  the  preferred  and  "  common  stocks/' 
or  some  other  similar  plan  is  adopted.  This  goes  to  show  that 
a  "  common  stock  "  is  not  necessarily  entitled  to  all  earnings 
after  payment  of  the  preferred  dividend. 

There  are  many  "  common  stocks,"  paying  no  dividends, 
which  sell  at  seemingly  unreasonably  high  prices.  This, 
among  other  reasons,  is  because  it  is  expected  that  dividends 
will  sooner  or  later  be  paid,  or  that  the  stock  may  some  time 
be  bought  for  the  purpose  of  control,  and,  consequently,  is 
valuable  on  account  of  its  voting  power. 

Although  "  common  stocks  "  usually  carry  with  them 
voting  power,  yet  there  are  examples  of  corporations  where 
the  control  goes  to  the  preferred  holders,  although  representing 
a  par  value  far  less  in  amount  than  the  common. 

A  "  common  stock  "  which  has  a  "  cumulative  "  preferred 
stock  preceding  it,  is  not  so  valuable  from  a  dividend  stand- 
point as  if  the  preferred  is  "  non-cumulative  "  (see  the  sub- 
jects in  quotations),  for  unless  the  earnings  of  a  company  are 
so  large  as  to  make  dividends  upon  both  classes  of  stock 
almost  assured,  the  "  cumulative  "  feature  may,  at  some  future 
time,  act  to  the  detriment  of  the  common. 


MONEY    AND    INVESTMENTS  97 

Community  of  Interests.  When  large  interests  in  one  cor- 
poration are  so  interwoven  with  those  of  another  that  it  is 
desirable,  for  the  common  good,  that  the  properties  shall  be 
operated  in  the  mutual  interests  of  all  concerned,  the  "  com- 
munity of  interest  "  idea  is  in  effect.  It  is  something  more 
than  a  mere  agreement  between  two  or  more  parties  to  operate 
in  the  interests  of  one  another;  it  is  where  the  invested  inter- 
ests are  such  that  not  to  do  so  would  be  detrimental. 

Ripley  says  the  "  community  of  interest  "  basis  of  consolida- 
tion has  not  been  industrially  applied,  except  possibly  in  the 
Standard  Oil  Co.,  after  the  dissolution  of  its  trust  in  1892. 

Comparisons.  When  a  stocl£  exchange  broker  compares 
his  sales  and  purchases  with  other  brokers  to  determine  that 
no  misunderstandings  exist,  "  comparisons "  have  been 
effected.  (See  next  subject.) 

Comparison  Slip  (or  Ticket.)  The  slip  of  paper  which  one 
broker  exchanges  with  another  showing  the  transaction 
between  them,  the  slip  being  in  duplicate,  one  being  returned 
to  the  seller  duly  signed  by  the  buyer,  if  found  correct.  (See 
"  Comparisons.") 

Composition.  An  agreement  whereby  a  creditor  accepts 
part  payment  in  lieu  of  an  entire  debt  due. 

Compound  Interest.    See  "  Simple  Interest." 

Compound  Option.  See  "  Call-of-more,"  "  Put-of-more," 
"  Spread,"  and  "  Straddle,"  any  of  which  are  meant. 

Comptroller.  An  officer  who  performs  certain  duties  in 
examining  the  accounts  or  taking  charge  of  the  financial 
affairs  of  a  State,  municipality,  or  corporation. 

Comptroller  of  the  Currency.  "  There  shall  be  in  the  De- 
partment of  the  Treasury  a  bureau  charged  with  the  execution 
of  all  laws  passed  by  Congress  relating  to  the  issue  and  regu- 
lation of  a  national  currency  secured  by  United  States  bonds, 
the  chief  officer  of  which  bureau  shall  be  called  the  Comp- 
troller of  the  Currency,  and  shall  perform  his  duties  under  the 
general  direction  of  the  Secretary  of  the  Treasury."  J  He 
has,  in  effect,  control  of  all  national  banks. 

Comptroller's  Call.    See  "  National  Bank  Call." 

Con.  (or  Consol.) .    Consolidated. 

Conant.  The  Philippine  "  pesos  "  are  unofficially  called 
"  Conants  "  in  honour  of  Charles  A.  Conant,  who  served  as  a 
commissioner  on  the  currency  of  those  islands. 

Concealed  Wealth.  A  recently  coined  Wall  Street  phrase  in- 
dicating the  value  of  a  property  greater  than  appears  by  its 
published  statements,  and  which  accounts  for  certain  stocks 

1  National  Bank  Act. 


98  MONEY    AND    INVESTMENTS 

selling  at  figures  seemingly  very  high,  judged  only  from  their 
dividend  paying  records. 

Conditional  Indorsement.  An  instrument  upon  which  the 
indorser  attaches  some  condition  along  with  his  indorsement 
as  to  his  liability. 

Conducting  Transportation.  Those  studying  the  earnings 
of  a  railroad  company  will  often  find  the  "  operating  ex- 
penses "  subdivided  under  various  headings,  including  the 
above,  which  should  consist  of  the  following  as  prescribed  by 
the  Interstate  Commerce  Commission:  Fuel,  water  supply,  oil, 
tallow,  waste,  and  other  supplies  for  locomotives,  switchmen, 
flagmen,  watchmen,  engine  and  roundhouse  men,  telegraph 
expenses,  train  service  supplies  and  expenses,  station  service 
and  supplies,  loss  and  damage,  injuries  to  persons,  clearing 
wrecks,  operating  marine  equipment  —  if  any  —  advertising, 
outside  agencies,  commissions,  stock  yards  and  elevators,  rent 
for  tracks,  yards  and  terminals,  rents  of  buildings  and  other 
property,  payments  for  switching  charges,  car  mileage  and 
hire  of  equipment  greater  than  receipts  therefor,  besides 
superintendence,  stationery,  printing,  and  other  expenses 
in  connection  therewith. 

The  Wall  Street  Journal  compiled  the  cost  of  "  conducting 
transportation  "  for  the  fiscal  year  ending  1906,  for  fourteen 
important  lines  of  road.  The  percentage  of  this  cost  to  the 
gross  earnings  ranged  all  the  way  from  29.3%  to  42.4%,  the 
average  being  36%,  which  is,  perhaps,  as  fair  a  figure  as  any 
to  arrive  at  of  this  percentage  cost. 

Confidence  Game.    Swindling.    (See  "  Gold  Brick.") 

Confirm.  "  To  confirm  "  is  to  reduce  to  writing  an  order  or 
agreement  previously  given  or  made  verbally. 

Conservator.  One  appointed  by  a  court  to  manage  the 
property  of  a  lunatic,  idiot,  or  other  person  incapable  of 
managing  his  affairs. 

Consideration.  Something  given,  as  money  or  property,  in 
return  for  a  promise,  as,  in  a  note,  or,  as  one  writer  puts  it: 
"  that  it  consists  in  a  benefit  to  the  promisor  or  a  detriment  to 
the  promisee."  1 

Consignee.  The  one  to  whom  goods  are  shipped;  the  re- 
ceiver of  them. 

Consignor.  The  one  who  ships  goods.  The  opposite  to  the 
"  consignee,"  who  receives  them. 

Consol  Certificates.  Issued  by  the  National  City  Bank  of 
New  York  to  represent  ownerships  in  the  "  Consols  "  (to  which 
refer)  of  Great  Britain  and  Ireland,  and  which  are  traded  in 

1  F.  M.  Burdick. 


MONEY    AND    INVESTMENTS  99 

here  in  America  in  lieu  of  the  original  "  consols."  This  method 
greatly  simplifies  such  transactions. 

Consolidated  Annuities.  Three  per  cent,  consolidated  an- 
nuities. See  "  Consols."  (The  rate  is  now  2£%.) 

Consolidated  Bonds.  See  "  Consolidated  Mortgage  Bond  " 
and  "  Consols." 

Consolidated  Exchange. *  "  The  Consolidated  Stock  and 
Petroleum  Exchange  of  New  York,"  its  proper  title,  is  in  New 
York  City  and  a  distinct  association  from  the  "  New  York 
Stock  Exchange."  On  the  "  Consolidated  Exchange,"  many 
securities  not  "  listed  "  on  the  large  stock  exchange  are  traded 
in,  as  well  as  grains,  etc.,  but  transactions  are  in  lesser  volume, 
and  at  a  reduced  commission;  i.  e.  1-16%  instead  of  1-8%. 

Also, the  securities  which  are  dealt  in  on  the  larger  exchange, 
are  very  extensively  bought  and  sold  upon  the  "  Consolidated 
Exchange,"  but  the  business  is  mostly  in  fractional  lots;  i.  e. 
less  than  one  hundred  shares.  The  smaller  exchange  has  in 
the  neighbourhood  of  1,500  members.  Seats  sell  around 
$2,000  each.  Transactions  probably  do  not  exceed  much 
over  10%  of  those  on  the  New  York  Stock  Exchange. 

Consolidated  First  Mortgage.  As  commonly  used  in  relation 
to  bond  issues,  it  has  the  same  meaning  as  "  first  and  consoli- 
dated mortgage." 

Consolidated  Mortgage  Bond.  Theoretically  the  name  of  a 
corporation  bond  secured  by  a  mortgage  on  the  entire  property 
formed  by  the  consolidation  of  several  smaller  properties. 
Such  a  mortgage  may  be  a  first  mortgage  upon  the  property 
so  consolidated,  or  it  may  be  subject  to  earlier  mortgages 
issued  by  one  or  more  of  the  several  companies  consolidated. 
In  the  latter  event,  it  would  not  only  be  a  "  consolidated 
mortgage  bond,"  but,  likewise,  a  "  general  mortgage  bond." 
(See  "  General  Mortgage  Bonds.")  The  name  "  consolidated 
mortgage  "  is  used  to  distinguish  such  an  issue,  in  the  case 
of  a  railway  company,  from  "  divisional  bonds;  "  that  is, 
mortgages  upon  the  separate  properties  consolidated. 

In  practice,  the  names  given  to  different  bond  issues, 
railway  issues  especially,  are  very  often  technically  incorrect, 
and  very  frequently  a  "  consolidated  mortgage  bond  "  differs 
materially  from  this  definition. 

A  very  common  use  of  the  term  is  for  an  issue  created  to 
take  the  place  of  —  refund  —  other  issues  having  a  prior  lien 
to  it,  but  which  are  not  yet  due;  the  new  debt  being  intended 
to  eventually  consolidate  the  funded  indebtedness  of  the 
company.  In  an  event  such  as  this,  the  new  issue  is  usually 

1  Any  one  wishing  to  study  more  fully  into  the  interesting  methods  of 
conducting  the  business  of  this  exchange,  will  find  an  excellent  treatment 
of  it  in  "  The  A  B  C  of  Stock  Speculation,"  by  Nelson. 


100  MONEY    AND    INVESTMENTS 

large  enough  to  retire  the  prior  indebtedness  and  furnish 
funds  for  needed  improvements.  An  equal  amount  of  the 
consolidated  issue  is  always  left  in  the  hands  of  the  trustee 
to  take  the  place  of  the  underlying  bonds  as  they  mature,  and 
it  is  also  proper  to  allow  for  an  increased  issue  of  the  con- 
solidated bonds  from  time  to  time  for  further  improvements, 
a  restriction  being  generally  inserted  in  the  trust  deed  that 
bonds  so  issued  shall  be  up  to  only  a  certain  percentage  of  the 
actual  cost  of  the  improvements. 

Consols.  The  name  applied  to  a  large  part  of  the  Govern- 
ment securities  of  Great  Britain;  that  portion  which  is  known 
as  the  "  Three  Per  Cent.  Consolidated  Annuities  "  or  "  Consoli- 
dated Threes."  The  Government  retains  the  right  to  pay  the 
principal  at  its  pleasure. x  The  rate  has  now  been  reduced  to 
2$%  on  these,  and  they  are,  consequently,  known  as  "  2£% 
Consols,"  also  called  "  Goschens." 

The  two  per  cent,  bonds  of  the  United  States  Government 
redeemable  after  1930  are  known  as  the  "  Two  Per  Cent. 
Consols." 

Any  bond  issue  which  has  taken  the  place  of  various  pre- 
vious issues,  of  different  rates,  maturities,  etc.,  so  that  the 
indebtedness  has  become  consolidated  into  a  uniform  issue 
of  bonds  may  be  known  as  "  Consols,"  i.  e.  "  consolidated 
bonds." 

Consols  Account  Day.    See  "  Consols  Settlement." 

Consols  Contango  Day.    See  "  Consols  Settlement." 

Consols  for  Account.  A  purchase  of  the  Government  se- 
curities of  Great  Britain  known  as  "  consols  "  for  delivery 
upon  the  next  settling-day.  There  is  only  one  settlement  a 
month  for  "  consols,"  and  this  is  entirely  distinct  from  the 
ordinary  settling-days.  (See  "  Fortnightly  Settling-Days. ") 
It  is  generally  within  the  first  week  of  the  month.  Purchases 
of  this  kind  are  known  as  "  for  account  "  and  quotations 
differ  from  those  purchased  "  for  money."  (See  the  following 
subject.) 

Consols  for  Money.  (Read  last  subject.)  This  is  a  pur- 
chase of  "  consols  "  for  cash;  immediate  delivery. 

Consols  Making-up  Day.     See  "  Consols  Settlement." 

Consols  Settlement.  Explained  under  "  Consols  for  Ac- 
count." This  settlement  consists  of  a  "  contango  day," 
"  making-up  day,"  and  "  account  day." 

Construction  Account.    "  Construction  account  "  is  treated 

1  "  By  25  Geo.  II.  the  balance  of  annuities  granted  by  8  Geo.  I.  was 
carried  to  a  three  per  cent,  stock,  formed  in  1731,  and  they  were  (in  1752) 
consolidated  into  one  stock  —  the  new  stock  is  still  called  '  three  per  cent, 
consols.'  The  word  consols  is  a  contraction  for  consolidated."  —  "  History 
and  Principles  of  Banking,"  GUbart. 


MONEY    AND    INVESTMENTS  101 

as  an  asset;  "  capital  account  "  as  a  liability.  Many  corpora- 
tions expend  money  and  incur  indebtedness  which  they 
charge  to  "  construction  account,"  with  the  idea  of  eventually 
issuing  new  capital  in  the  way  of  stock  or  bonds,  and,  from  the 
proceeds  of  such  issue,  replenish  their  cash  for  money  ex- 
pended or  use  the  proceeds  to  pay  the  indebtedness  incurred 
for  the  items  charged  to  "  construction  account."  (See  also 
"  Capital  Account.") 

Construction  Company.  A  corporation  —  a  firm,  individual, 
or  an  association  of  individuals,  etc.,  may  perform  all  the 
functions  of  a  "  construction  company  "  -  which  constructs 
some  public  work  such  as  a  steam  or  electric  railroad.  For 
the  purposes  of  this  book,  ordinary  contractors  are  not  in- 
cluded. The  "  construction  company  "  here  referred  to  is  one 
which  agrees  to  turn  over  the  completed  property  in  exchange 
for  all,  or  a  part  of,  the  company's  securities.  This  ensures  a 
sale  of  stocks  or  bonds,  etc.,  sufficient  to  pay  for  the  con- 
struction. It  offers,  at  times,  opportunities  for  those  in  con- 
trol of  the  "  construction  company  "  to  obtain  securities  at 
low  prices,  if  there  is  a  wide  margin  of  profit  between  the 
actual  cost  of  the  construction  and  the  face  value  of  the 
securities  taken  in  payment.  It,  likewise,  affords  a  chance 
for  a  company  to  issue  "  watered  securities,"  i.  e.  securities 
exceeding  in  their  face  value  the  actual  value  of  the  property 
which  they  represent,  provided  that  the  officers  in  charge  of 
the  affairs  of  the  company  are  substantially  the  same  as  those 
of  the  "  construction  company,"  as  is  sometimes  the  case. 

Constructive  Mileage.  Allowance  by  a  main  line  of  railway 
to  a  branch  or  connecting  line  of  a  greater  proportion  of  the 
earnings  on  freight  originating  on  the  smaller,  and  destined 
to  some  through  point  on  the  main  line,  than  a  mileage  pro- 
portion of  such  earnings  would  give  it.  For  example:  the 
main  line,  90  miles  long,  allows  the  branch  line,  ten  miles 
long,  earning  at  the  rate  of  two  miles  for  each  mile  the 
freight  is  actually  carried  by  the  branch.  The  branch  would 
not  receive  one-tenth  but  two-elevenths  of  the  earnings. 

Contango.  If  a  London  broker  makes  a  sale  of  a  certain 
stock,  deliverable  at  some  future  day  —  in  practice  upon  the 
'•'  Account-day  "  or  "  Pay-day  "  -  and  before  such  date  re- 
quests a  further  delay  in  delivery,  or  borrows  the  stock  else- 
where to  make  delivery  —  the  necessity  for  which  might 
arise  from  the  stock  being  scarce  or  oversold  —  the  charge 
which  the  purchaser  makes  for  granting  him  the  extension, 
or  the  charge  made  by  the  lender  of  the  stock,  is  called  "  back- 
wardation," or  "back."  If,  however,  the  situation  is  just 
the  reverse  and  the  purchaser  of  stock  requests  a  delay  in  de- 
livery, the  charge  made  for  such  an  accommodation  is  called 


102  MONEY    AND    INVESTMENTS 

a  "  contango."  "  Backwardation  "  is  paid  by  the  "  bear," 
and  "  contango  "  by  the  "  bull." 

Contango  Day.  (Read  last  subject.)  This  is  the  day  on 
which  "  contangos  "  are  arranged.  It  is  the  first  of  the 
"  Fortnightly  Settling-days."  Also  called  "  Continuation 
Day,"  "  Making-up  Day,"  and  "  Carrying-over  Day."  On 
this  day  the  settling  price  is  fixed  by  the  London  Stock  Ex- 
change, upon  which  all  accounts  are  based  and  made  up. 
The  rate  of  interest,  which  is  called  "  contango,"  is  also  fixed. 

Continental.  All  Europe,  exclusive  of  the  British  and  other 
Isles. 

Continental  paper  money,  issued  by  authority  of  the 
Continental  Congress  during  the  Revolutionary  War,  and 
used  to  defray  the  greater  part  of  the  expenses  of  that  war. 
An  enormous  amount  of  it  was  put  out,  the  sum  total  being 
about  $360,000,000.  The  market  became  so  glutted  with  it 
that  it  depreciated  tremendously,  and  finally  became  almost 
worthless,  one  instance  being  reported  where  $1,000  in  this 
currency  was  given  in  exchange  for  $1.00  in  silver.  This 
explains  our  common  expression  "  don't  care  a  continental." 

Continental  Bill.  A  "bill  of  exchange  "  payable  on  the 
continental  part  of  Europe.  This  term  is  used  to  distinguish 
such  from  those  payable  in  England,  which  are  termed 
"  sterling  bills." 

Continental  Bourses.  The  European  stock  exchanges  other 
than  those  in  the  British  Isles.  (Also  read  "  Bourse.") 

Continental  Markets.    Berlin,  Antwerp,  and  Paris. 

Contingent  Fund.  Money  set  aside  to  be  drawn  upon  only 
in  case  of  certain  emergencies. 

Contingent  Profit.  A  conditional  profit.  A  lawyer  occa- 
sionally conducts  a  case  upon  a  "  contingent  profit  "  or  fee, 
his  payment  for  services  being  entirely  dependent  upon  his 
winning  the  case. 

Contingent  Rights  Stock.  An  English  term.  This  stock 
shares  dividends  on  the  "  ordinary  stock  "  (see  "  Preferred 
Shares  ")  after  the  latter  has  received  a  certain  rate. 

Continuation  Day.  The  first  of  the  "  Fortnightly  Settling- 
days.  (See  that  subject  and  also  "  Contango  Day.")  For 
many  securities  the  second  "  settling-day  "  is  the  "  continua- 
tion day." 

Continued  Bond.    Same  as  "  extended  bond." 

Contract  Grade.  Chicago  Board  of  Trade  term  indicating 
the  grade  which  is  required  on  contracts  for  future  delivery. 

Control.    See  "  Controlling  Interest." 

Controller.    See  "  Comptroller." 


MONEY    AND    INVESTMENTS  103 

Controlling  Interest.  When  one  person,  or  a  number  to- 
gether for  their  mutual  benefit,  obtain,  by  ownership  or  by 
proxies  (see  "  Proxy  "),  their  right  to  cast  the  votes  for  a 
majority  of  the  shares  of  stock  in  any  corporation,  such 
person  or  persons  are  said  to  have  a  "  controlling  interest." 

Conv.     Convertible. 

Convertible  Bond.  A  bond,  which,  at  the  option  of  the 
holder,  is  convertible,  under  certain  conditions,  into  other 
securities  issued,  usually,  by  the  same  corporation. 

As  a  rule  bonds  are  convertible  into  stock.  One  of  the  best 
illustrations  is  a  "  convertible  bond  "  which  was  issued  in  1901 
by  the  United  Fruit  Company.  These  bonds  became  con- 
vertible into  the  stock  of  the  company  at  par,  at  the  option 
of  the  holder,  after  Jan.  1,  1903.  The  bonds  bear  5%  interest. 
The  stock  of  the  company,  at  this  time  of  writing,  pays  a 
greater  rate  of  interest  than  the  bonds,  and  is  quoted  at  a 
price  above  par.  The  result  is  that  the  bonds,  which  in  them- 
selves would  not  sell  at  a  much  higher  price  than  their  face 
value  were  it  not  for  the  convertible  feature,  follow  very  nearly 
the  price  of  the  stock.  It  would  not  necessarily  follow,  how- 
ever, that  if  the  stock  fell  below  its  face  value,  the  bonds 
would  do  likewise. 

A  great  many  holders  of  the  bonds  have  taken  advantage 
of  the  convertible  feature  and  have  exchanged  the  same  for 
company's  stock,  thus  getting  a  greater  rate  of  interest. 

The  attractive  feature  about  these  bonds  to  the  original 
purchaser  was  that  they  were  considered  much  safer  than  the 
stock,  and  at  the  time  of  issue  the  stock  was  not  selling  above 
its  face  value.  The  purchaser  of  the  bonds,  therefore,  felt 
reasonably  secure  of  his  money  in  any  event;  his  interest 
would  rank  ahead  of  dividends.*  But  in  case  the  stock  should 
advance  in  price,  he  would  then  reap  a  profit  from  the  con- 
vertible privilege;  in  other  words,  he  probably  had  nothing  to 
lose,  and,  possibly,  much  to  gain  by  buying  such  a  security. 
It  is  the  lottery  or  speculative  feature  which  gives  such  in- 
vestments their  popularity.  This  plan  of  financiering  caters 
to  the  speculative  spirit  and  is  scarcely  a  high-class  method. 
In  case  the  stock  is  "  converted  "  the  annual  interest  charge 
becomes  contingent  instead  of  fixed. 

Convertible  Collateral  Trust  Bonds.  This  issue  is  endowed 
with  practically  the  same  features  as  a  "  collateral  trust  bond," 
to  which  subject  the  reader  is  referred.  The  main  difference, 
however,  is  that  the  former  is  secured  by  collaterals,  which 
may  be  exchanged  from  time  to  time  for  other  collaterals, 
with  the  consent,  for  instance,  of  the  trustee.  The  con- 
vertible feature  is  not  a  bad  one  as  it  sometimes  enables 
the  issuing  company  to  take  advantage  of  an  increase 


104  MONEY    AND    INVESTMENTS 

in  the  market  value  of  possibly  all  or  part  of  the  collateral 
securities,  and  paying  off  part,  or  possibly  all,  of  the  issue, 
the  proviso  almost  always  being  inserted  that  the  issuing 
company  may  redeem  the  issue  in  part  or  entire  under  such 
conditions.  Should  none  of  the  issue  be  paid  off,  or  a  pro- 
portionate amount  not  paid  off  to  offset  the  collaterals  with- 
drawn, the  trustee  would  demand  other  satisfactory  collaterals 
to  fill  the  deficiency.  There  are  other  similar  good  features  of 
minor  note  attached  to  the  convertible  bond,  and,  upon  the 
whole,  as  between  the  two  issues,  the  convertible  one  is  the 
more  preferable,  other  conditions  being  equal. 

Convertible  Debenture.  The  only  difference  between  a 
"  convertible  debenture  "  and  a  "  convertible  bond  "  is 
as  to  the  way  the  loan  is  secured,  which  will  be  clearly  under- 
stood by  turning  to  the  subject  "  Debenture  Bond."  A  good 
illustration  of  such  an  issue  is  that  of  the  American  Tele- 
phone and  Telegraph  Co.,  "  Convertible  Debenture  "  4's,  to 
which  there  is  attached  the  lottery  feature  of  convertibility 
into  stock  after  three  years  and  before  the  expiration  of 
twelve  years  at  stipulated  prices. 

Convertible  Income  Bonds.    See  "  Income  Bonds." 

Convertible  Paper  Money.  Paper  money  which  the  holder 
has  the  right  to  present  at  any  time  for  redemption  at  a  parity 
in  metallic  money.  This  is  distinguished  from  "  inconvertible 
paper  money,"  which  subject  see. 

Convertibles.  Securities  which,  at  the  option  of  the  holder, 
are  convertible,  under  certain  conditions,  into  some  other 
security,  issued,  usually,  by  the  same  corporation.  For  ex- 
amples see  "  Convertible  Bond,"  "  Convertible  Collateral 
Trust  Bonds,"  and  "  Convertible  Debenture." 

Convt.     Convertible. 

Cooked.  A  matter  or  account  has  been  "  cooked  "  when  pur- 
posely made  to  deceive. 

Co-operative  Banks.  For  all  practical  purposes  these  are 
about  the  same  as  "  building  and  loan  associations,"  to  which 
refer.  One  conspicuous  difference  exists,  however,  namely: 
the  right  of  a  member  of  the  former  to  withdraw  the  accumu- 
lations upon  his  unpledged  shares,  by  giving  due  notice,  say 
thirty  days,  and  upon  certain  other  conditions. 

Copper  (or  Coppers).  "  Copper  "  is  used  in  various  ways; 
with  an  "  s  "  in  reference  to  shares  of  stock  of  the  various 
copper  companies,  and  without  the  "  s "  to  indicate 
the  product  of  the  mine.  "  Copper  the  metal "  is  a 
common  expression  as  distinguished  from  "  copper  the 
stock." 

The  United  States  dominates  the  copper  industry  of  the 


MONEY    AND    INVESTMENTS  105 

world.  In  1855  our  output  was  only  about  3,000  tons,  and 
ten  years  earlier  we  produced  the  insignificant  amount  of 
100  tons.1  Our  1905  output  was  approximately  402,637  tons, 
the  money  value  of  which,  based  on  an  average  price  of  15.70 
cents  per  pound,  was  $144,599,380.  The  estimated  production 
for  1906  was  about  413,834  tons.  Including  what  we  have 
from  adjoining  countries,  north  and  south,  we  handle  about 
two-thirds  of  the  world's  production. 

Our  pennies  are  often  referred  to  as  "  coppers." 

Copper  a  Tip.  Acting  contrary  to  the  "  tip,"  or  information 
received. 

Copper  Coins.    See  "  Cent." 

Copper  Range.    Copper  Range  Consolidated  Co. 

Coppers.  All  stocks  of  the  copper  mining  companies.  Also 
our  pennies. 

Copper  Warrants.  A  term  used  in  England  to  denote  re- 
ceipts for  copper  placed  in  the  public  storehouses.  We  have 
nothing  corresponding  to  these  receipts  in  this  country. 
"  Copper  warrants  "  are  sometimes  sold  and  delivered  at  the 
sale,  and  the  copper  is  taken  out  of  store  and  used,  but  it  is  a 
very  common  practice  for  contracts  to  be  made  for  the  future 
sale  or  delivery  of  these  warrants.  Sometimes  a  contract  for 
future  delivery  is  bought  by  a  manufacturer,  who  has  taken 
an  order  for  manufactured  goods,  also  for  future  delivery,  and 
for  which  he  has  yet  to  supply  himself  with  refined  copper. 
At  times  "  copper  warrants  "  are  sold  by  others  engaged  in 
trade  to  protect  themselves  in  a  like  manner.  They  are  also 
often  bought  and  sold  in  mere  speculation. 

Corn.  This  is  explained  under  "  Grain,"  except  that  the 
trading  unit  for  future  delivery  is  5,000  bushel  lots  and  the 
"  margin  "  about  3  cents  per  bushel,  the  commission  being 
the  same  as  on  other  grains. 

Corner.  A  control  of  a  commodity  or  security  for  the 
purpose  of  raising  prices.  A  "  corner  in  wheat  "  occurs  when 
one  person,  or  a  group,  secretly  buys  practically  all  the 
wheat  in  the  market,  and  others,  who  have  made  contracts 
to  deliver  wheat  on  the  supposition  that  it  could  be  bought 
in  time  to  comply  with  their  contracts,  and  not  knowing  of 
the  secret  buying  for  control,  suddenly  find  that  in  order  to 
meet  their  agreements  they  are  obliged  to  pay  such  prices 
as  those  in  control  demand.  A  witness  in  court  once  de- 
scribed a  "  corner "  as  "a  ...  combination  to  prevent 
people  short  of  stocks  from  buying  them." 

"  Corners  "  have  often  proved  dangerous  to  those  attempt- 

1  Statistics  from  here  on  furnished  by  D.  Houston  &  Co.,  metal  brokers, 
New  York  City.  The  weights  are  long  tons  of  2,240  pounds  each. 


106  MONEY    AND    INVESTMENTS 

ing  the  same,  and  very  frequently  they  reap  financial  disaster 
for  their  pains. 

Corporation. *  A  charter  may  be  obtained  from  the  legisla- 
ture of  a  State,  or  from  such  officers  as  may  be  authorized 
to  grant  charters,  or,  even  under  certain  conditions,  from 
Congress.  This  charter  is  an  instrument  which  states  the 
privileges,  etc.,  which  the  body  incorporated  thereunder  en- 
joys. The  different  ownerships  in  the  business  to  be  con- 
ducted under  this  charter  are  represented  by  shares  of  stock, 
and  the  owners  thereof  are  known  as  stockholders.  Very 
large  enterprises,  such  as  railroads,  etc.,  are  generally  con- 
ducted in  an  incorporated  form,  as  such  large  amounts  of 
capital  are  wanted,  necessitating  so  many  subscribers,  that  a 
partnership  agreement  would  be  unwieldy.  And,  also,  owing 
to  the  desire  which  would  arise  from  the  multiplicity  of  owner- 
ship for  transference  or  sale  of  the  same  to  other  parties. 
A  corporation  is  more  permanent  in  its  character  than  a 
partnership,  or  a  business  conducted  by  an  individual. 

There  are  many  enterprises,  very  largely  of  a  public  nature, 
such  as  gas,  electric  lighting,  street  railways,  etc.,  which  must 
lawfully  be  conducted  by  incorporated  companies,  so  that 
there  may  be  more  or  less  State  control  of  the  same.  Still 
another  reason  in  favour  of  incorporating  is  that  the  owners 
of  the  shares  are  limited  in  their  liability  for  the  debts  of  the 
corporation,  whereas,  if  the  business  were  conducted  as  a 
firm,  each  partner  is  liable  for  all  the  partnership  debts. 

Although  formerly  corporations  were  usually  created  to 
conduct  the  larger  enterprises,  to-day  their  use  has  been 
extended  to  almost  every  conceivable  business  or  industry.  It 
might  be  found  difficult  to  secure  money  to  "  finance  "  many 
such  if  it  were  not  possible  to  obtain  many  stockholders  for 
small  amounts. 

For  the  benefit  of  those  who  desire  such  information,  some 
of  the  essential  points  to  consider  in  forming  an  incorporated 
company  are  as  follows: 

The  majority  of  companies  may  incorporate  under  the  laws 
of  some  other  State,  if  so  desired,  than  that  in  which  business 
is  actually  conducted;  except  in  case  where  certain  privileges 
are  derived  from  the  State  in  which  the  enterprise  is  carried  on. 
This  has  resulted  in  almost  countless  instances  of  the  selection 
of  that  State  which  conveys  the  greatest  privileges  in  a  charter. 
There  are  many  which  have  enacted  laws  especially  to  en- 
courage this  sort  of  thing,  thereby  deriving  a  large  revenue 
from  the  same.  Some  one  has  facetiously  referred  to  New 
Jersey,  West  Virginia,  and  Maine,  as  the  "  Incubators  of 

1  A  corporation  has  been  legally  defined  as  "  an  invisible,  intangible 
person  existing  only  in  contemplation  of  law." 


MONEY    AND    INVESTMENTS  107 

Trusts,"  as  those  three  "  charter  bartering  States "  are, 
perhaps,  most  liberal  in  the  scope  of  the  charters  granted. 
They  convey  rights  upon  corporations  to  do  things  in  other 
States  often  forbidden  by  the  laws  of  those  States. 

Wherever  a  company  is  incorporated,  it  is  necessary  to  file 
with  the  Secretary  of  State,  or  some  other  properly  designated 
officer,  a  "  certificate  of  incorporation  "  (see  that  subject) 
following  the  form  as  furnished  by  the  State  in  question.  (In 
many  instances,  such  as  railroads,  etc.,  it  may  be  necessary 
to  obtain  a  special  legislative  act.)  Accompanying  the  cer- 
tificate of  incorporation,  a  copy  of  the  constitution  and  by- 
laws is  usually  required. 

When  companies  organize  under  a  different  State  than  that 
in  which  they  operate,  it  is  necessary  to  name  a  resident 
"  attorney  in  fact  "  to  whom  is  delegated  the  usual  powers 
of  such  attorneys. 

Some  of  the  States  require  the  principal  office  of  any 
company  incorporated  therein  to  be  located  somewhere  within 
its  borders,  where  books,  like  the  stock  and  transfer  books, 
shall  be  kept. 

It  is  not  the  intention  here  to  suggest  anything  as  to  the 
actual  formation  of  the  company  itself,  the  holding  of  meet- 
ings, electing  directors,  adopting  of  the  constitution  and  by- 
laws, and  so  on;  for  competent  legal  advice  should  always  be 
obtained  in  that  direction.  In  fact,  so  far  as  that  goes,  it  is 
very  essential  that  an  incorporation  of  any  kind  should  not 
only  be  conducted  under  a  careful  supervision  of  counsel,  but 
under  very  painstaking  and  competent  counsel.1  (See  also 
"  Corporation  Trust  Companies.") 

Corporation  Bonds.  A  bond  issued  by  an  incorporated 
company,  the  ownership  of  which  is  represented  by  shares  of 
stock;  a  bond  of  a  joint-stock  company.  Bonds  issued  by 
governments,  States,  or  any  territorial  subdivision  thereof, 
although  corporation  bonds  in  one  sense  are  not  so  known 
in  the  banking  world,  but  are  known  as  "  government  bonds," 
"  State  bonds,"  and  "  municipal  bonds."  Occasionally  an 
exception  is  made,  as  "  corporation  stock  2  of  the  City  of 
New  York,"  meaning  New  York  City  bonds.  Investment 
bonds  are  in  general  covered  by  two  classes,  "  corporation  " 
and  "  municipal."  (Read  "  Bond.") 

The  former  are,  usually,  secured  by  a  mortgage  upon  all,  or 
a  portion,  of  the  property  of  the  company  obligating 
itself  to  pay  the  same.  They  can  be  issued  only  by  per- 

1  The  East  India  Co.  incorporated  in  1600  is  about  the  earliest  example 
of  a  large  modern  corporation. 

In  England  the  word  "  company  "  is  used  as  the  equivalent  to  our 
"  corporation,"  the  latter  term  having  reference  to  a  municipal  body  only. 

:  In  Great  Britain  this  is  also  a  common  name  for  municipal  securities. 


108  MONEY    AND    INVESTMENTS 

mission  and  under  the  direction  of  the  company's  share- 
holders. 

It  is  customary  to  protect  the  rights  of  bondholders  by 
selecting  some  trustee  —  usually  a  trust  company  —  to  hold 
the  mortgage  against  the  property,  and  to  carry  out  certain 
acts  necessary  to  the  issue.  (See  "  Trustee.") 

A  bond  of  this  class  states  on  its  face  many  of  the  rights, 
both  of  the  issuing  company  and  the  holder,  and  refers  to  the 
deed  of  trust  in  further  accordance  with  which  the  issue  is 
created.  (See  "  Deed  of  Trust.") 

Corporation  Paper.  Notes,  acceptances,  etc.,  held  against 
incorporated  companies.  "  Mill  paper  "  may  be  "  corporation 
paper,"  but  all  "  corporation  paper  "  is  not  necessarily  "  mill 
paper." 

Corporation  Securities.  Except  in  very  special  cases  this  is 
a  common  title  for  stocks,  bonds,  etc.,  issued  by  incorporated 
companies,  such  as  railways,  electric  light,  gas,  water,  etc., 
but  occasionally  some  such  expression  as  "  corporation  stock 
of  the  City  of  New  York  "  will  refer  to  the  municipal  obligation 
of  the  same. 

Corporation  Trust  Companies.  If  the  reader  will  first  turn 
to  the  subject  "  Corporation,"  it  will  be  found  that  a  good 
many  companies  are  incorporated  under  States  other  than 
that  in  which  they  transact  business,  which  have  enacted 
statutes  to  encourage  incorporating  under  their  laws.  These 
States  have  located  in  some  one  of  their  principal  cities  a 
trust  company  known  by  the  above  title,  at  which  place  many 
means  are  afforded  for  the  greater  facilitating  the  complying 
with  the  necessary  laws  of  such  States.  These  trust  companies 
have  rooms  where  meetings  may  be  held;  furnish  blank  forms 
of  various  kinds,  and  some  one  connected  therewith  is  selected 
as  the  resident  director  of  the  company,  and  so  on.1 

Corresponding  Clerk.  This  employee  of  a  bank  is  one  to 
whom  the  items  for  collection  out  of  town  are  turned  over. 

1  The  Wall  Street  Journal,  in  its  issue  of  April  21,  1906,  refers  to  these 
companies  as  follows: 

"  Under  the  guidance  of  the  Corporation  Trust  Company,  or  any  of  the 
numerous  promoting  counsel,  a  wayfaring  man  cannot  miss  the  path  lead- 
ing straight  to  the  labyrinths  of  high  finance.  These  gentlemen  have 
printed  forms  all  prepared  and  will  give  you  on  short  notice  a  corporation 
born  full-fledged,  capital,  dummy  directors  and  all,  without  even  a  per- 
sonal visit  to  New  Jersey.  One  '  dummy  '  may,  as  in  one  instance  I  learned 
of  recently,  act  for  100  or  more  corporations.  These  automatons  are 
mummies  as  well  as  dummies.  No  discretion  or  responsibility  is  expected 
or  required.  As  soon  as  the  fee  is  paid  to  the  Secretary  of  State  the  incor- 
poration, '  equivalent  to  a  special  act  of  the  legislature,'  becomes  operative. 

"  This  fee,  in  order  to  encourage  these  promotions,  is,  compared  with 
the  privileges  and  opportunities  conferred,  but  nominal.  In  consequence, 
all  sorts  of  wildcat  schemes  receive  charters  to  do  as  they  please  and  no 
questions  asked." 


MONEY    AND    INVESTMENTS  109 

He  must  keep  a  record  of  everything  of  this  nature  sent  by 
mail  or  express,  and  see  that  they  are  forwarded  to  the  proper 
points  for  payment,  whether  they  are  demand  or  time  items. 
He  has  charge  of  all  coupons  payable  out  of  town  and  has 
a  very  large  correspondence  relating  to  all  such  matters. 

Cotton.  "  Future  "  and  "  spot  "  transactions  occur  in 
cotton  trading,  which  are  explained  under  those  subjects. 
The  buying  or  selling  unit  is  100  bales,  or  50,000  Ibs.  The 
average  weight  of  a  contract  bale  is,  therefore,  500  Ibs.  Fluc- 
tuations are  recorded  in  "  points;  "  a  cent  is  divided  into  100 
"  points."  If  cotton  declines  50  "  points  "  it  declines  £  cent 
per  pound,  or  $2.50  on  each  bale,  equal  to  $250  on  the  100 
bales.  The  commission  charged  non-members  of  the  New  York 
Cotton  Exchange  is  $7.50  for  buying  and  $7.50  for  selling 
100  bales,  or  $15  for  the  "  round  turn,"  as  it  is  called.  The 
commission  charged  members  is  $7.50  for  the  "  round  turn." 
The  margin  demanded  by  brokers  depends  largely  upon 
the  character  and  standing  of  the  customers;  also  somewhat 
upon  the  price  of  cotton.  One-half  cent  per  pound  is  about  the 
usual  margin,  namely,  $250  on  each  100  bales. 

Cotton  Bill.  A  "  bill  of  exchange  "  drawn  against  a  ship- 
ment of  cotton.  (See  "  Exchange.") 

Cotton-Carrying  Roads.  The  important  railways  of  the 
South,  or  which  extend  into  that  section,  and  which  carry  the 
bulk  of  the  cotton  product,  such,  for  instance,  as  the  Central 
of  Georgia  Railway,  Nashville,  Chattanooga  &  St.  Louis 
Railway,  Missouri,  Kansas  &  Texas  Railway,  St.  Louis  South- 
western Railway,  St.  Louis  &  San  Francisco  Railroad,  Sea- 
board Air  Line  Railway,  Southern  Railway,  Illinois  Central 
Railroad,  Louisville  &  Nashville  Railroad,  Atlantic  Coast 
Line,  Mobile  &  Ohio  Railroad,  Rock  Island  Co.,  etc. 

Cotton  Port  Receipts.  The  weekly  net  receipts  of  cotton 
at  the  principal  Southern  ports,  such  as  Galveston,  New  Or- 
leans, Mobile,  Savannah,  Charleston,  Wilmington,  etc. 

Cotton  Ports.  Galveston,  New  Orleans,  Mobile,  Savannah, 
Charleston,  Wilmington,  etc. 

Cotton  Roads.     See  "  Cotton-Carrying  Roads." 

Council  Bills.     See  "  Council  Drafts." 

Council  Drafts.  Also  termed  "  council  bills,"  "  India 
council  bills,"  "  India  council  drafts,"  etc.  These  are  issued 
in  London  and  payable  in  India  in  "  rupees,"  the  money  in 
current  use  in  the  latter  country.  The  financial  affairs  of 
that  country  are  managed  in  London  by  what  is  known  as  the 
"  India  Council,"  which  offers  for  sale  Wednesday  of  each 
week  to  the  highest  bidders  a  certain  amount  of  "  council 
bills,"  which  are  purchased  by  those  desiring  to  make  re- 


110  MONEY    AND    INVESTMENTS 

mittances  to  Calcutta  and  other  points  in  India.  The  London 
papers  give  the  prices  at  which  these  bills  are  sold,  distin- 
guishing between  those  which  are  sold  for  remittance  by  mail, 
and  for  what  are  known  as  "  telegraphic  transfers;  "  namely, 
where  immediate  use  is  wished  for  the  money  in  India  —  the 
latter  usually  selling  at  a  slight  advance  over  the  former. 
The  reports  always  show  the  amounts  disposed  of,  and  the 
minimum  rates  obtained. 

Any  sales  made  between  the  regular  Wednesday  meetings 
are  referred  to  as  "  specials."  India  payments  in  London 
must  be  made  in  gold,  whereas  London  payments  in  India 
must  be  made  in  "  rupees."  All  this  is  made  possible  by  means 
of  the  "  India  Council." 

Country  Banks.  As  referred  to  among  the  national  banks, 
those  located  in  neither  a  "  reserve  "  nor  a  "  central  reserve 
city  "  (refer  to  those  subjects)  and  which  need  maintain  a 
"  reserve  "  (see  footnote  to  "  Central  Reserve  Cities  ")  of 
only  15%  of  their  net  deposits,  only  two-fifths  of  which  must 
be  in  their  own  vaults.  The  balance  may  be  deposited  with 
a  bank  in  either  a  "  reserve  "  or  "  central  reserve  city  "  with 
the  approval  of  the  Comptroller  of  the  Currency.  "  Country 
banks  "  are  not  allowed  to  hold  the  "  reserve  "  of  any  other 
national  bank. 

Country  Checks.  Much  the  same  thing  as  "  out-of-town 
checks,"  except  that  the  term  is  more  specifically  applied  to 
checks  against  banks  more  remote  from  the  particular  clearing- 
house. 

Coupon.  Interest  coupons  are  small  certificates  attached 
to  that  part  of  the  bond  representing  the  principal  sum,  each 
coupon  representing  the  interest  upon  the  bond  for  a  certain 
period,  there  being  attached  to  each  bond  a  sufficient  number 
of  these  coupons  to  represent  the  interest  for  the  entire  length 
of  time  which  the  bond  may  be  outstanding  before  maturity. 
These  coupons,  or  certificates,  are  cut  off  as  they  severally 
become  due,  and  presented  at  the  place  designated  for  pay- 
ment. 

Do  not  detach  coupons  from  a  bond  other  than  the  next 
one  maturing.  Many  investors  have  the  habit  of  visiting  at 
infrequent  intervals  their  safe  deposit  vaults  or  "  places  of 
concealment,"  in  which  they  keep  their  securities,  and  cutting 
from  their  bonds,  at  such  periodical  visits,  the  two  or  more 
next  maturing  coupons,  which  they  will  keep  at  home  in  some 
place  subject  to  possible  loss  or  destruction.  That  in  itself  is 
sufficient  reason  for  not  doing  this.  There  is  a  true  happening 
of  a  woman  who  had  quite  a  collection  of  such  coupons  on  a 
shelf  in  some  room  in  her  house.  The  windows  being  left  open 
one  day,  a  sudden  draft  swept  the  bits  of  paper  out  of  doors, 


MONEY    AND    INVESTMENTS  111 

and,  although  every  effort  was  made  to  find  them,  there  were 
a  few  never  recovered. 

Another  objection  to  this  plan  is  that  if,  for  any  reason,  a 
bond,  with  the  coupons  so  detached,  is  sold,  it  necessitates 
delivering  it  with  the  cut  unmatured  coupons  pinned  thereon, 
which  is  more  or  less  objectionable  for  many  reasons. 

Where  it  is  intended  to  send  bonds  to  London  for  sale,  from 
which  coupons  not  due  have  been  detached,  they  should  be 
re-attached  by  means  of  gummed  paper,  and  not  pinned  to 
the  bonds. 

Coupon  Bonds.  Any  bonds  which  have  attached  interest 
notes  or  coupons  which  may  be  presented  for  payment  at 
stated  intervals  as  the  interest  becomes  due,  and  which  notes 
or  coupons  are  made  payable  to  bearer.  (See  "  Coupon.") 

Coupon-Clerk.  Some  large  banks  have  the  work  so  sub- 
divided that  a  special  clerk  known  as  a  "  coupon-clerk  " 
attends  to  the  collection  of  bonds  and  coupons,  whether  such 
are  among  the  bank's  deposits  or  left  by  its  customers  for 
collection.  If  there  is  a  "  corresponding  clerk  "  in  the  bank, 
the  "  coupon-clerk  "  would  turn  over  to  him  bonds  or  coupons 
payable  out  of  town.  The  "  coupon-clerk  "  has  minor  duties 
to  perform,  but  those  already  mentioned  are  the  principal 
ones. 

Coupon  Notes.  A  "  coupon  note  "  would  seem  to  be  an 
ordinary  promissory  note  having  a  long  enough  time  to  run 
to  call  for  different  interest  payments,  the  interest  being 
represented  by  attached  tickets  or  coupons,  which  must  be 
presented,  from  time  to  time,  in  order  to  collect  the  interest. 
In  most  circumstances  these  notes  would  naturally  be  made 
payable  to  bearer,  passing  from  hand  to  hand  without  in- 
dorsements, but  this  is  not  necessarily  so,  as  the  note  may  be 
drawn  payable  to  some  person  or  order,  in  which  event  it 
passes  by  indorsement;  this,  however,  not  affecting  the 
coupons,  which  are  good  in  the  hands  of  any  bona  fide  holder 
without  indorsement.  The  notes  accompanying  a  great  many 
of  the  Western  farm  mortgages  are  in  coupon  form. 

"  Coupon  notes  "  comprise  those  having  a  comparatively 
short  time  to  run,  say  five  years  or  less,  but  when  issued  by  a 
corporation,  in  what  way  they  technically  differ  from  a 
"  debenture,"  it  is  difficult  to  say,  unless  the  fact  that  the 
latter  has  a  longer  life  explains  it. 

Municipalities  desiring  to  borrow  money  for  a  relatively 
short  time,  yet  longer  than  six  months,  often  issue  "  coupon 
notes."  This  has  also  been  a  favourite  form  of  security  issued 
by  many  corporations  of  late  which  have  borrowed  large 
sums  for  short  periods. 

Coupon  Off.     Same  as  "  Ex-Coupon." 


112  MONEY   AND    INVESTMENTS 

Coupons,  Collection  of.  Coupons  are  almost  always  made 
payable  to  "  bearer,"  that  is,  like  a  ten  dollar  bill,  good  in  the 
hands  of  any  one,  therefore,  care  should  be  taken  in  trans- 
mitting them  from  one  point  to  another.  The  simplest  method 
on  the  part  of  an  individual  to  collect  the  money  due  upon 
the  coupon  is  to  take  it,  about  a  week  previous  to  its  maturity, 
to  his  local  bank,  requesting  the  bank  to  attend  to  the  col- 
lection for  him.  Banks  have  the  safest  and  most  thorough 
systems  for  coupon  collecting. 

If  the  owner  of  the  coupon  demands  a  receipt  from  the 
bank  at  such  a  time,  the  bank  should  be  careful  to  give  a 
receipt  describing  the  coupon  and  stating  that  the  same  is 
taken  for  "  collection  only,"  unless  the  bank  makes  a  charge 
for  the  collection,  in  which  event  it  is  fair  that  it  should  as- 
sume the  responsibility  for  the  safety  of  the  coupon,  and 
the  return  of  the  funds  collected.  Care  should  be  taken, 
however,  not  to  give  a  receipt  which  would  in  any  way 
guarantee  the  payment  of  the  coupon. 

If  it  is  necessary  or  more  desirable  to  send  coupons  to  some 
distant  point  and  not  through  the  local  bank,  registered  mail 
is  the  usual  method,  although  express  companies  are  oc- 
casionally used  for  this  purpose. 

Be  sure  to  cut  off  from  all  bonds  the  proper  coupons  for 
the  next  interest  period.  It  is  surprising  how  often  investors 
detach  coupons  due  the  wrong  year  or  the  wrong  month  in  the 
same  year. 

Course  of  Exchange.    Same  as  "  Rate  of  Exchange." 

Cours  Force.  A  French  term  having  reference  to  the 
forced  circulation  of  "  irredeemable  paper  money." 

Cours  Le*gal.  The  French  term  for  the  legal  tender  quality 
of  metallic  money. 

Covering.    See  "  Short  Covering,"  meaning  the  same. 

C.  P.  A.     Certified  Public  Accountant. 

Cr.     "  Credit." 

Credit.  (From  the  Latin  credere,  to  believe.)  Delivery  of 
goods  in  confidence  of  future  payment;  deferring  a  payment. 
This  is  nothing  more  nor  less  than  confidence  which  one  has 
inspired  among  others  as  to  his  honesty  and  intent  to  meet 
his  obligations,  with  every  human  probability  of  his  doing  so. 
It  enables  him  to  borrow  money  on  his  simple  written  prom- 
ise to  pay;  to  obtain  goods  to  be  paid  for  later;  and  is  the 
foundation  of  all  business.  "Credit,"  said  Daniel  Webster, 
"  is  the  vital  air  of  the  whole  system  of  modern 
business." 

Lyman  J.  Gage  declared  that,  "  next  to  production  and 
the  means  of  transportation,  credit  (through  which  the 


MONEY    AND    INVESTMENTS  113 

products  of  industry  are  exchanged)  is  the  most  important 
operating  factor  in  our  business  life." 

Conant  believes  one  of  the  simplest  definitions  of  "  credit  " 
to  be  that  of  Devas;  i.  e.  "  Agreed  postponement  of  pay- 
ments in  currency."  He  considers,  however,  this  definition 
of  Tucker's  the  best:  "  The  transfer  of  something  valuable 
to  another,  whether  money,  goods,  or  services,  in  the  con- 
fidence that  he  will  be  both  willing  and  able,  at  a  future  day, 
to  pay  its  equivalent." 

Conant  also  declares  that  the  fundamental  elements  of 
"  credit  "  are  confidence  and  time. 

In  bookkeeping  the  credit  side  of  an  account  is  that  on 
which  is  entered  the  credit  for  money  received,  or  its  equiva- 
lent. For  instance,  A  owes  B  $15.  That  fact  is  entered 
upon  the  "  debit  "  side  of  B's  books  as  a  charge  against  A. 
But  A  makes  a  payment  of  $10;  this  fact  is  entered  upon 
the  "  credit  "  (right-hand)  side  of  B's  account,  showing  a 
credit  to  A  of  the  amount. 

Credit  Currency.  Currency  issued  by  a  bank,  the  security 
for  which  is  only  the  general  assets  of  the  institution.  The 
notes  of  the  Bank  of  France  are  so  secured  and  are  strictly 
speaking  "  credit  currency,"  whereas  notes  of  the  Bank  of 
England  are  substantially  "  gold  certificates,"  as  against  all 
additional  notes  above  a  certain  fixed  amount  there  is  a 
deposit  of  gold  coin  and  bullion.  United  States  "  gold  "  and 
"  silver  certificates  "  are  in  no  sense  "  credit  currency,"  as 
each  one  represents  a  like  sum  of  gold  or  silver  deposited  to 
secure  it.  They  are  the  nearest  approach  to  real  money  with- 
out being  actual  money  that  exists. 

Credit  Insurance.  There  are  companies  which  will  insure  a 
manufacturer,  or  wholesaler,  against  loss  arising  from  selling 
goods  on  credit.  The  usual  method  is  for  the  wholesaler  to 
show  his  average  loss  for  the  past  five  years,  and  for  the 
company  to  insure  him  for  annual  losses  in  excess  of  that 
amount.  He,  very  likely,  will  be  required  to  sell  to  retailers 
of  a  certain  commercial  rating  (see  "  Commercial  Agencies  "), 
and  the  premium  charged  may  depend  upon  the  grade  of 
rating  allowed.  The  amount  of  credit  allowed  to  any  one 
purchaser  is  dependent  upon  the  size  of  the  policy,  and  the 
rating  of  the  debtor. 

Credit  Lyonnaise.  One  of  the  French  banks,  corresponding 
to  the  joint-stock  banks  in  London.  It  holds  the  same  re- 
lation to  the  Bank  of  France  as  do  the  English  banks  to  the 
Bank  of  England.  The  head  office  is  in  Lyons,  but  its  prin- 
cipal business  and  most  important  position  are  in  Paris. 

Creditor.  One  to  whom  a  sum  of  money  or  other  thing  is 
due;  one  who  has  a  just  claim  for  money.  In  the  case  of  a 


114  MONEY    AND    INVESTMENTS 

failure  of  a  business  those  to  whom  money  is  owed  by  the  firm 
are  its  "  creditors." 

Creditor  Bank.     See  "  Clearing-House." 

Cremation  Certificate.  A  signed  statement  by  certain  per- 
sons especially  selected  or  appointed,  or  a  certain  committee 
authorized  so  to  do,  that  they  have  witnessed  the  burning 
(total  destruction  by  fire)  of  the  securities  or  papers  named 
in  the  certificate. 

Crops.     See  "  Movement  of  the  Crops." 

Crore.    See  "  Rupee." 

Cross.    See  "  Mark  Signature." 

Crossed  Check.  An  English  custom.  When  the  maker  of 
an  ordinary  check  draws  bars,  i.  e.  parallel  lines,  across  its 
face  it  is  understood  that  the  person  to  whom  it  is  payable 
cannot  collect  it  directly  of  the  bank  upon  which  it  is  drawn, 
but  must  do  so  through  some  other  bank  or  banking  house. 
By  this  plan  the  payee  will  be  obliged  to  seek  a  bank  at  which 
he  is  known  and  which  will  accept  his  indorsement  as  satis- 
factory evidence  of  the  maker's  credit. 

When  the  two  bars  have  "  &  Co.,"  between  them,  the 
check  is  said  to  be  "  crossed  in  blank,"  and  may  be  presented 
at  any  bank  other  than  the  one  on  which  it  is  drawn,  but 
when  the  maker  wishes  it  presented  at  some  particular  bank, 
he  stamps  across  its  face  the  name  of  such  bank,  and  the 
check  is  then  "  specialized." 

The  above  method  is  a  safeguard  against  checks  being 
cashed  when  in  the  hands  of  illegal  holders. 

Crossed  in  Blank.     See  "  Crossed  Check." 

Cross  Exchange.     See  "  Triangular  Operation." 

Crossing  Stocks.  The  same  as  "  cross  trade,"  to  which 
refer. 

Cross  Trade.  An  order  received  to  buy  and  an  order  to 
sell  the  same  stock  at  the  same  price  by  a  broker,  in  which 
event  he  might  let  one  order  offset  the  other  and  not  fill  them 
upon  the  exchange  at  all.  It  is  contrary  to  the  rules,  however. 

Suppose  Jones  &  Co.  receive  an  order  to  sell  100  shares  of 
a  given  stock  at  90;  at  the  same  time  they  receive  an  order 
for  the  purchase  of  a  like  amount  of  the  same  stock  at  the 
same  price.  All  transactions  by  a  member  of  the  stock  ex- 
change, in  what  are  known  as  stock  exchange  securities, 
must  be  made  on  the  floor  of  the  exchange,  and  the  quota- 
tions made.  It  would  be  perfectly  proper  for  Jones  &  Co. 
to  "  match  up,"  as  it  were,  the  purchase  of  this  stock  against 
its  sale,  provided  that  there  was  no  other  like  amount  of  the 
same  stock  offered  at  a  lesser,  or  bid  for  at  a  higher,  price  on 
stock  exchange  than  90.  In  actual  practice,  the  broker  goes 


MONEY    AND    INVESTMENTS  115 

to  that  part  of  the  exchange  where  the  particular  stock  is 
dealt  in,  and  declares  to  the  other  brokers  that  "  I  will  take 
to  myself  100  shares  of  -  stock  at  90,  if  there  are  no  ob- 
jections." Then  if  no  bids  or  offers  are  made  as  above  sug- 
gested, the  final  results  would  be  that  the  100  shares  belonging 
to  Jones  &  Co.'s  customer  who  gave  the  selling  order,  would 
be  transferred  into  the  hands  of  the  other  client  who  had  given 
the  purchasing  order,  each  paying  Jones  &  Co.  a  commission, 
the  matter  being  actually  consummated  on  the  floor  of  the 
stock  exchange,  and  the  prices  made  public  through  the 
usual  channels.  This  is  commonly  called  "  crossing  stocks." 
(See  also  "  Matched  Orders.") 

Crown.  An  English  coin  equal  to  five  of  their  shillings  or 
$1.216  in  United  States  money.  Also  the  monetary  units  of 
Austria-Hungary,  Denmark,  Norway,  and  Sweden,  the  first 
being  equal  to  $0.203,  the  other  three  $0.268  in  United  States 
money. 

CT.    The  "  ticker  "  abbreviation  for  "  certificates." 
Cum  Dividend.     The  English  equivalent  of  the  American 
term  "  dividend  on." 

Cum  Rights.     Inclusive  of  "  rights." 
Cum  Rts.     "  Cum  rights,"  i.  e.  inclusive  of  "  rights." 
Cumulative.    This,  as  a  rule,  has  reference  to  "  preferred  " 
shares  of  stock.    Unpaid  dividends  upon  such  stocks  accumu- 
late from  year  to  year,  and  must  be  paid  before  the  common  or 
other  stocks   which   come   after   can   receive   anything.      A 
"  cumulative  "  issue  often  acts  to  the  detriment  of  the  com- 
mon shares,  as  it  naturally  lessens  the  chances  of  dividends 
upon  them. 

A  good  illustration  is  that  of  the  Rutland  Railroad  Company 
preferred  and  common  stocks.  The  former  is  7%  cumulative, 
and  the  amount  of  unpaid  dividends  now  due  on  this  stock 
(October,  1906  *)  and  which  have  accumulated  through  failure 
from  year  to  year  to  meet  the  7%  requirements,  amount  to 
166%.  Unless,  therefore,  some  readjustment  of  the  finan- 
cial plan  can  be  made  the  common  stock  has  a  very  question- 
able value,  for  if  no  dividends  can  be  paid  upon  it  until  the 
back  dividends  accumulated  upon  the  preferred  have  been 
made  up,  there  seems  little  hope  for  the  common  from  a 
dividend  standpoint. 

Cumulative  Income  Bonds.    See  "  Income  Bonds." 
Cumulative  Preferred  Stock.    See  "  Cumulative." 
Curb.     Securities  which  are  not  traded  in  upon  the  large 
stock  exchanges,  or  new  securities  which  have  not  as  yet  been 
listed  upon  such  exchanges,  are  handled  in  what  is  known 

1  United  States  Investor,  Oct.  6,  1906. 


116  MONEY    AND    INVESTMENTS 

as  the  "  curb  "  market.  In  New  York,  the  trading  in 
such  securities  actually  takes  place  on  Broad  Street  opposite 
the  Mills  Building,  where  gathers  daily  from  10  A.M.  to  3  P.M. 
a  noisy  crowd  of  brokers.  The  name  "  curb,"  therefore,  has 
real  application  under  the  circumstances.  Many  years  ago, 
before  the  establishment  of  stock  exchanges,  practically  all 
trading  was  upon  the  "  curb;  "  that  is,  on  some  understood 
place  in  the  street,  as  in  the  case  in  New  York.  In  Boston 
a  "  curb  "  market  has  recently  been  established  upon  Ex- 
change Place.  A  "  curb "  market  existed  in  London  in 
'Change  Alley  for  nearly  a  century.  A  "  curb  "  market  existed 
in  Paris  in  1720,  for  at  the  time  of  the  "  Mississippi  Bubble  " 
it  was  necessary  to  rope  off  the  Rue  Quincompoix  for  pro- 
tection against  the  general  public. 

Any  security  may  be  dealt  in  upon  the  "  curb."  Such  a 
high-priced  stock  as  Standard  Oil,  as  well  as  the  most  specula- 
tive class  of  investments,  exchange  hands  in  this  way.  In 
New  York,  dealings  upon  the  "  curb "  have  become  so 
extensive  that  many  of  the  regular  stock  exchange  houses 
conduct  a  "  curb  "  department.  There  are  very  few  houses 
which  will  permit  marginal  transactions  except  in  the  very 
best  "  curb  "  securities.  Commissions  for  "  curb  "  transac- 
tions differ  in  various  cities,  in  some  cases  being  about  the 
same  as  the  stock  exchange  commissions  in  that  city,  and  in 
another  instance  ranging  from  1-16  of  1%  per  share  down, 
there  being  no  fixed  rate. 

The  reason  nowadays  for  the  existence  of  "  curb  markets  " 
in  the  open  rather  than  in  some  building,  is  that  if  the  latter 
plan  were  pursued  there  would,  in  truth,  exist  another  ex- 
change, and  it  would  not  be  permissible  for  a  member  of  the 
regular  exchange  of  the  same  city  to  be  represented  thereon, 
as  he  frequently  now  is  upon  the  "  curb." 

Curb  Broker  (or  Curbstone  Broker).  One  who,  usually, 
not  being  a  member  of  the  stock  exchange,  transacts  business 
upon  the  "  curb  "  (see  "  Curb  ")  or  by  going  from  office  to  office. 

Currency.  "  The  power  of  passing  from  hand  to  hand;  " 
money.  As  one  writer  says:  "  that  while  money  is  currency, 
currency  is  not  necessarily  money;  "  this  presupposes  a  very 
technical  definition  for  "  money."  For  our  purpose,  a  defini- 
tion of  "  currency  "  will  do,  that  calls  it:  whatever  is  in 
common  use  among  persons  serving  them  as  money  to  buy 
commodities  or  pay  debts. 

Currency  Act.     See  "  Financial  Bill." 

Currency  Bond.  A  bond  not  specifically  payable  in  gold 
coin,  but  in  any  lawful  money. 

Currency  Certificate.  Another  term  for  "  Legal  tender 
certificates." 


MONEY    AND    INVESTMENTS  117 

Current1  Account.  An  account  not  closed,  but  showing 
transactions  from  time  to  time. 

Current  Assets.  "Shifting  and  changeable  assets"2  such 
as  cash  on  deposit  and  on  hand,  loans,  accounts  and  bills 
receivable,  etc. 

Current  Liabilities.  Amounts  owed  subject  to  constant 
change,  such  as  accounts  payable,  loans  payable,  bills  payable, 
interest  and  dividends  accrued  towards  the  next  payments, 
pay  rolls,  etc.  Floating  indebtedness  of  all  kinds  comes  under 
this  heading. 

Current  Prices.     Present  prevailing  prices. 

Curtailing  a  Note.  If  a  note  falls  due  and  the  borrower 
wishes  to  extend  it  for  a  lesser  amount  by  making  a  partial 
payment  upon  the  same,  or  gives  a  new  note  for  the  reduced 
sum  after  making  such  a  payment,  the  process  is  called  "  cur- 
tailing." Making  partial  payments  upon  a  "  demand  note  " 
from  time  to  time  would  be  to  the  same  effect. 

Cutting  a  Melon.     See  "  Melon." 

CV.    The  "  ticker  "  abbreviation  for  "  convertible." 

CY.     The  "  ticker  "  abbreviation  for  "  currency." 


D 

d.     Penny  (pence.) 

D.  The  "  ticker  abbreviation  for  "  debenture  "  or  "  divi- 
sion." 

d/a.  Stands  for  "  documents  for  acceptance,"  to  which 
subject  refer. 

Daily  Balances.  Trust  companies,  as  a  rule,  and  sometimes 
other  banking  institutions,  allow  interest  to  their  depositors 
upon  "  daily  balances  "  of  over  a  certain  amount,  say  $300 
or  more.  This  means  that  at  the  close  of  each  business  day, 
the  total  amount  which  each  depositor  has  had  to  his  credit 
unchanged  for  the  last  preceding  twenty-four  hours  is  ascer- 
tained, and  if  equal  to  or  over  the  $300,  or  whatever  the 
agreed  sum  may  be,  then  interest  is  allowed  for  the  day  upon 
such  amount,  but  only  on  sums  divisible  by  $100;  that  is, 
no  interest  would  be  allowed  for  the  fractional  amounts 
greater  than  the  even  hundreds.3  If,  however,  the  deposit 

1  This  word  is  from  the  Latin  verb  "  currere,"  to  run. 

2  T.  F.  Woodlock. 

5  This  last,  however,  is  subject  to  some  flexibility,  To  illustrate:  if 
the  amount  of  the  daily  balance  is  $625,  the  institution  would  figure  it  as 
an  even  $600.  On  $699  it  might  figure  it  as  $700.  Some  minimum  amount, 
as.  say,  $90,  in  each  $100  may  be  taken  and  any  over  $690  and  less  than 
$700.  for  instance,  would  be  figured  as  the  latter  amount.  It  is  also  some- 


118  MONEY    AND    INVESTMENTS 

is  less  than  the  agreed  sum,  no  interest  is  allowed  for  that  day. 
By  this  method,  a  depositor  is  encouraged  to  keep  his  deposit 
equal  to,  or  greater  than,  the  sum  specified,  and,  furthermore, 
a  lesser  sum  is  not  supposed  to  be  profitable  enough  to  a 
banking  institution  to  warrant  the  payment  of  any  interest 
upon  it. 

Daly- West.  The  Daly- West  Mining  Co.  (gold).  In  1902 
it  absorbed  the  Quincy  Mining  Co. 

Date  of  Bonds.  Care  should  always  be  taken  to  avoid 
dating  an  issue  of  bonds  upon  Sunday.  A  New  Jersey  city 
issued  recently  $50,000  worth  of  bonds  dated  on  Sunday. 
New  ones  had  to  be  created  to  replace  them. 

Dating  (Dating  a  Bill).  A  commercial  term.  A  purchaser 
of  goods  persuades  the  seller  to  date  the  bill  a  certain  length 
of  time  ahead  of  the  actual  shipment,  say  thirty  days,  and 
then,  if  he  is  accustomed  to  a  certain  other  definite  length  of 
time  to  pay  in,  the  time  does  not  begin  until  the  expiration 
of  the  thirty  days.  By  this  plan  an  extra  credit  time  is 
obtained. 

Day  Book.  This  is  one  of  the  account  books  used  in  single 
entry  bookkeeping,  another  name  for  which  is  "  blotter." 
(Refer  to  that  subject.) 

Days  of  Grace.  Generally  three  extra  days  given  by  the 
"  grace  "  of  the  payee  (see  "  Payee  ")  in  which  a  note  or 
other  paper  may  be  paid  after  its  maturity.  Formerly  no 
interest  was  charged  for  the  three  days,  later,  interest  was 
charged,  but  now  the  custom  of  allowing  "  days  of  grace  " 
has  practically  ceased.  If  the  laws  of  a  State  provide  for 
"  days  of  grace  "  and  the  same  are  demanded,  then  it  is 
understood  that  interest  may  be  added  for  the  time.  Neither 
party  can  make  or  obtain  payment  before  the  expiration  of 
the  time  except  at  the  pleasure  of  the  other.  "  Grace  " 
prevails  throughout  Great  Britain,  but  does  not  exist  upon 
the  Continent. 

Day-to-Day  Loan.  A  loan  of  money  for  over  night,  and, 
possibly,  renewed  from  day  to  day. 

In  New  York  the  following  custom  prevails: 

If  a  call  for  payment  or  a  renewal  is  wished,  notice  to  that 
effect  must  be  given  by  one  party  to  the  other  between  the 
hours  of  11  A.M.  and  1  P.M.  daily.  In  the  event  of  no  such 
notice  being  received  by  either  party  the  loan  continues  until 
the  next  day,  the  lender  notifying  the  borrower  what  the  rate 
will  be  for  the  succeeding  twenty-four  hours.  It  is  fully  under- 
times left  to  the  judgment  of  the  one  in  charge  of  that  work  of  the  institu- 
tion, to  take  into  consideration  the  activity  of  the  account.  If  it  should  be 
inactive  and  running  a  balance  of,  say  $650,  he  might  add,  at  the  end  of 
the  interest  period,  a  few  hundred  dollars  to  the  amount  on  which  he 
figures  the  interest. 


MONEY    AND    INVESTMENTS  119 

stood  that  no  demand  for  payment  of  a  "  day-to-day  loan  " 
will  be  made  after  1  P.  M.  Loans  made  on  Friday  are  carried 
over  till  Monday. 

D.  C.  3.653.  "  District  of  Columbia  bonds "  bearing 
3.65%  interest.  (See  subject  in  quotations.) 

DE.    The  "  ticker  "  abbreviation  for  "  deferred." 

Dead  Assets.    Valueless  or  non-income-producing  property 

Dead  Luck.  A  man  who  has  lost  all  financial  means;  a 
non-income-bearing,  valueless,  or  defaulted  security. 

Deal.  A  transaction  made  without  general  public  knowl- 
edge; a  scheme  for  profit;  a  secret  financial  arrangement  for 
the  advantage  of  those  engaged  in  it,  as  a  "  railway  deal." 
"  There  is  a  deal  on  in  Grand  Pacific."  By  this  is  meant  that 
those  controlling  the  affairs  of  that  company  are  making  secret 
arrangements,  or  plans,  the  result  of  which  will  probably 
cause  its  stock  to  advance  in  price,  or  return  other  profits  to 
those  engineering  the  "  deal."  A  "  deal  "  is  sometimes  the 
taking  advantage  of  forthcoming  events  at  the  expense  of  the 
stockholders. 

Dear.  Money  had  a  "  tendency  to  be  dear;  "  meaning  that 
there  was  a  tendency  towards  an  advance  in  interest  rates  at 
which  money  could  be  borrowed. 

Dear  Money.  High  interest  rates;  money  difficult  to  borrow 
and  then  only  at  a  high  rental. 

Debasement  of  Currency.  A  reduction  in  its  quality;  an 
impairment  of  its  worth  or  purity;  a  degradation  of  gold  or 
silver  by  the  use  of  an  alloy. 

De  Beers.  The  De  Beers  Consolidated  Mines,  Limited.  A 
diamond  mine  of  South  Africa,  whose  securities  are  largely 
dealt  in  upon  the  London  Stock  Exchange. 

Debenture.  "  Debenture  bond  "  (which  subject  see)  is  the 
security  usually  understood  by  this  term.  Throughout  the 
Dominion  of  Canada,  however,  as  well  as  Great  Britain  and 
her  colonial  possessions  in  general,  the  term  "  debenture  " 
is  used  in  speaking  of  municipal  obligations,  such  as  we  refer 
to  as  "  bonds."  Canada  being  more  or  less  influenced  by  its 
dealings  with  the  United  States,  uses  the  expression  "  munici- 
pal bond "  almost  as  much  as  "  municipal  debenture," 
although,  in  speaking  on  the  subject  generally,  they  make  a 
distinction  by  using  the  word  "  debenture  "  to  indicate  a 
municipal  issue  as  against  the  word  "  bond  "  for  a  corporation 
security.  In  Great  Britain,  the  word  "  debenture  "  is  often 
used  to  distinguish  "  debenture  "  issues  of  railroads  where 
there  is  no  "  trust  deed  "  securing  the  same. 

Debenture  Bond.  An  evidence  of  indebtedness  issued  by  a 
corporation  having  precedence  over  its  preferred  and  common 


120  MONEY    AND    INVESTMENTS 

stocks.  It  is  commonly  nothing  more  than  a  note,  very  likely 
in  coupon  form,  and  not  secured  by  mortgage. 

A  so-called  "  debenture  bond  "  does  sometimes  carry  a  lien 
of  some  sort  upon  the  property  of  the  company,  but  the  writer 
is  of  the  opinion  that  "  debenture  "  is  not  the  proper  title 
for  a  bond  so  secured,  but  "  mortgage  debenture  "  should  be 
used.  Certainly  in  this  country  in  the  earlier  days  of  banking 
a  "  debenture  bond  "  was  one  unsecured  by  mortgage;  not 
so  in  England,  however. 

Provision  is  often  made  that  no  mortgage  indebtedness  shall 
be  created  during  the  life  of  a  "  debenture  "  issue  which  shall 
not  equally  secure  the  latter.  This  is  a  very  desirable  feature 
and  enhances  its  value. 

Technically,  when  a  railway  or  other  corporation  deposits 
stocks  and  mortgage  bonds  in  a  trust  company  and  issues 
another  bond  against  them,  a  "  debenture  mortgage  "  is  the 
result,  but  by  custom  such  bonds  are  often  called  "  collateral 
trust." 

There  are  issues  bearing  the  name  of  "  debenture  mortgage 
bonds  "  which  are  actually  secured  by  junior  liens  directly 
upon  the  property,  as  in  the  case  of  the  Wabash  Railroad 
Company,  which  has  such  an  issue,  divided  into  two  classes: 
Series  A  and  B,  commonly  called  "  debenture  A  "  and  "  de- 
benture B  "  bonds;  the  former  having  preference  for  interest 
only  over  series  B.  Interest  on  either  issue  is  not  payable 
unless  earned,  and  is  non-cumulative. 

The  desirability  of  a  "  debenture  bond  "  as  an  investment 
depends  largely  upon  the  financial  status  of  the  corporation 
by  which  it  is  issued,  and  upon  the  amount  of  indebtedness 
having  a  prior  claim.  No  foreclosure  can  be  accomplished  in 
case  of  default;  the  holder  is  simply  a  noteholder  and  must 
take  what  he  can  get  after  all  prior  claims  are  satisfied. 

Debenture  Income  Bonds.    See  "  Income  Bonds." 

Debenture  Mortgage.  There  was  a  very  general  custom 
some  years  ago  on  the  part  of  "  farm  mortgage  companies  " 
of  issuing  what  were  known  as  "  debentures."  The  farm 
mortgage  company  would  deposit,  say,  $110,000,  par  value, 
of  mortgages  upon  real  estate,  with  some  trust  company, 
and  issue  against  them  $100,000  worth  in  "  debentures  " 
bearing  a  lesser  rate  of  interest  than  the  mortgages.  There 
was  supposed  to  be  less  risk  to  the  investor  in  buying  one  of 
these  "  debentures  "  than  in  purchasing  any  specific  mortgage. 
This  class  of  securities  should  be  called  "  debenture  mort- 
gages." Comparatively  few  such  investments,  however,  are 
being  dealt  in  at  present. 

Debenture  Mortgage  Bonds.    See  "  Debenture  Bond." 

Debenture  Shares  (or  Stock).    The  English  equivalent  of  the 


MONEY    AND    INVESTMENTS  121 

American  term  "debenture"  or  "debenture  bonds,"  except 
that  in  Great  Britain  such  a  security  is  generally  secured  by 
a  mortgage  or  by  the  hypothecation  of  specific  securities. 
This,  however,  is  not  always  the  case,  and  when  not  so,  it  as- 
sumes more  the  form  of  our  American  "  debenture."  The  En- 
glish "  debentures  "  rank  ahead  of  the  "  preference  "  and 
"  ordinary  shares."  Gabbott  *  says  that  "  Debenture  stock  is 
the  absorption  of  mortgage  debts;  it  is  the  first  charge  on  a 
company.  The  interest  is  at  a  fixed  rate,  and  the  claims  on 
a  company  as  binding  as  a  mortgage."  ("  Irredeemable 
Debentures  "  may  be  read  in  this  connection.) 

Debit.  To  make  a  charge  against;  to  charge  a  person  with 
goods  sold.  In  bookkeeping  the  debit  side  of  an  account  is 
that  on  which  is  entered  the  charge  for  money  or  its  equivalent 
delivered;  for  instance,  if  A  owes  B  $15  it  would  stand  on 
the  debit  (left-hand)  side  of  B's  books  as  a  charge  against  A. 

Debtee.    One  to  whom  a  debt  is  due;   a  creditor. 

Debtor.  A  person  who  owes  another  either  money  or  its 
equivalent.  A  person  running  an  account  at  a  grocery  store 
becomes  its  debtor  for  the  amount  owed.  An  insolvent  debtor 
is  one  who  has  not  sufficient  money  or  property  to  pay  all 
debts. 

Debtor  Bank.    See  "  Clearing-House." 

Debt  Per  Capita.  On  June  30,  1906,  the  per  capita  debt  of 
the  United  States  was  $11.41. 

Deed.  A  document  in  writing  (generally  a  printed  form  to 
be  filled  out  in  writing  is  used)  rendered  authentic  by  the  seal 
of  the  party  whose  intention  it  is  supposed  to  declare;  in 
practice,  a  document  used  for  the  purpose  of  transferring  the 
title  of  real  property  from  one  to  another.  In  law  a  "  deed  " 
is  any  instrument  bearing  a  seal. 

"  Deeds  "  conveying  real  estate  are  commonly  of  two  kinds. 
First,  a  "  quit-claim  deed,"  by  which  the  one  giving  it  in  no 
way  holds  himself  responsible  for  any  defects  in  the  title; 
that  is  to  say,  he  merely  transfers  his  own  rights  and  interests 
therein,  whatever  they  may  be,  and  if  the  title  is  imperfect 
the  one  accepting  the  deed  can  recover  nothing.  Second,  a 
"  warranty  deed."  This  differs  from  the  last  named  in  the 
party  giving  the  deed  guaranteeing  the  property  conveyed 
to  be  free  from  any  defects  of  title,  and  under  this  the  acceptor 
of  the  deed  is  entitled  to  recover  should  a  defect  subsequently 
be  discovered. 

Deed  of  Trust.     See  "  Trust  Deed." 

Defaced  Coin.  Metallic  money  which  has  been  tampered 
with;  cut,  stamped,  injured,  or  changed  in  any  way. 

1  "  How  to  Invest  Money,"  E.  R.  Gabbott. 


122  MONEY    AND    INVESTMENTS 

b 

Default.  A  failure  to  meet  an  obligation  or  promise.  If, 
at  the  time  due  the  interest  upon  a  bond  is  not  paid  it  is  said 
to  be  in  "  default." 

Defaulted  Bonds.     See  last  subject. 

Deferred  Annuity.  A  fixed  sum  of  money  payable  yearly, 
but  the  payment  of  which  does  not  begin  until  the  expiration 
of  a  certain  time  or  after  the  happening  of  some  event,  as  the 
death  of  a  person. 

Deferred  Bonds.  The  holder  of  such  a  security  receives  a 
gradually  increasing  rate  of  interest  up  to  a  fixed  rate,  after 
which  time  the  rate  of  interest  is  supposed  to  be  uniform. 
Or  bonds  upon  which  the  interest  is  deferred  until  some 
future  date. 

Deferred  Dividend.  By  reading  "  deferred  stock "  one 
meaning  of  this  may  be  found.  Life  insurance  companies 
term  "  deferred  dividends  "  those  which  are  not  distributed 
among  the  policy-holders  yearly,  but  retained  by  the  com- 
pany and  paid  to  the  holders  at  greater  intervals,  say  twenty 
years.  (See  "  Tontine  Insurance.") 

Deferred  Ordinary  Shares  (or  Stock).  The  English  equiva- 
lent of  the  American  term  "  common  stock,"  but  only  a 
certain  part  of  such  issue.  (See  "  Preferred  Shares.") 

Deferred  Shares  (or  Stock).  Shares  in  a  corporation,  the 
holder  of  which  is  not  entitled  to  receive  dividends  until  the 
expiration  of  a  fixed  time  or  until  some  specific  event  has 
taken  place.  (For  an  explanation  of  the  English  use  of  this 
term  see  "  Preferred  Shares.") 

Deficit.  When  the  losses  of  a  business  are  greater  than  the 
gain  or  profit,  or  when  an  industry  costs  more  to  operate  than 
its  receipts,  it  is  said  to  have  made  a  "  deficit."  To  say  a 
business  has  "  earned  a  deficit  "  simply  means  that  it  has  been 
run  at  a  loss. 

Del  Credere.  A  commission  charged  by  a  broker  or  factor 
who  guarantees  the  solvency  of  the  customer  for  whom  he 
transacts  business.  Also  the  obligation  itself  so  incurred. 

Delinquent  Tax  Certificates.  These  were  formerly  a  not 
uncommon  form  of  investment  in  the  West,  as  well  as  in  some 
other  sections  of  the  country,  but  their  desirability  is  ques- 
tionable, as  there  are  many  objections.  It  may  be  a  long  term 
of  years,  according  to  the  State  in  which  the  property  is 
located,  before  one  may  know,  without  question,  as  to  the 
actual  outcome,  and  the  money  may  be,  therefore,  tied  up  for 
that  length  of  time.  There  is  also  a  possibility  of  a  law  suit 
to  defend  the  title.  The  rates  of  interest  are  usually  very  high, 
but  should  be  in  order  to  offset  the  bother  and  uncertainty 
incident  to  an  investment  of  this  class.  The  laws  relating  to 


MONEY    AND    INVESTMENTS  123 

tax  certificates  vary  greatly  in  the  different  States,  but  some 
idea  of  their  general  characteristics  may  be  obtained  by  using 
two  Western  States  as  examples. 

Colorado.  Tax  certificates  are  issued  by  the  County  Treas- 
urer for  lands  sold  for  unpaid  taxes.  They  are  a  first  lien  on 
the  property,  but  the  land  may  be  redeemed  from  the  lien  at 
any  time  within  three  years  after  the  date  of  sale  or  thereafter 
at  any  time  before  the  execution  of  the  deed  to  the  purchaser. 
To  effect  such  redemption  the  owner  of  the  land  must  pay  the 
County  Treasurer  for  the  benefit  of  the  holder  of  the  tax 
certificate  the  amount  for  which  the  land  was  sold,  with 
interest  thereon  from  the  date  of  sale  at  the  rate  per  cent,  per 
annum  bid  by  the  purchaser  at  such  sale  not  to  exceed  the 
rate  of  24%  per  annum  for  the  first  six  months,  18%  per 
annum  for  the  subsequent  six  months  and  the  remaining 
period  the  rate  of  12%  per  annum,  together  with  the  amount 
of  all  taxes  accruing  on  such  real  estate  after  the  sale  paid 
by  the  purchaser  and  indorsed  on  his  certificate  of  purchase 
with  the  interest  thereon  at  the  rate  of  12%  per  annum, 
provided,  that  from  the  time  when  the  purchaser  is  entitled 
to  a  deed  such  taxes  shall  bear  interest  at  8%  per  annum 
and  no  more  up  to  the  time  of  applying  for  such  deed.  If  no 
redemption  is  made  within  the  three  years  the  holder  of  the 
tax  certificate  is  entitled  to  a  treasurer's  tax  deed  upon 
giving  certain  notices.  This  deed  cannot  be  attacked  in  court 
for  irregularities  after  five  years  after  the  execution  and 
delivery  thereof,  except  the  owner  be  a  minor,  or  insane,  or 
an  idiot  residing  in  the  United  States,  in  which  case  he  shall 
have  a  year  after  disability  is  removed  to  bring  such  action. 

Such  tax  certificates  are  assignable  by  indorsement. 

Wyoming.  Redemption  may  be  made  in  three  years  after 
sale  by  payment  of  amount  of  sale  and  15%  on  same,  with 
10%  interest  per  annum  on  whole  amount  and  subsequent 
taxes,  and  10%  per  annum  thereon.  Tax  deed  in  three  years. 

Deliveries.  Deliveries  of  securities  upon  the  New  York 
Stock  Exchange  must  be  made  not  later  than  2.15  P.  M.  on 
the  day  sold,  if  for  "  cash  "  or  if  sold  in  the  "  regular  way  " 
then  before  2.15  P.  M.  on  the  following  business  day.  On 
half-holidays  which  the  exchange  observes,  cash  sales  require 
delivery  not  later  than  11.30  A.  M. 

In  case  of  failure  to  make  deliveries  as  above,  the  un- 
delivered portion  may  be  bought  in  "  under  the  rule."  (See 
the  various  subjects  quoted;  also  "  Bids  and  Offers  "  and 
"  Transfer  in  Blank.")  If  delivery  is  offered  after  hours  the 
buyer  may  refuse  it  until  the  following  business  day,  but  the 
seller  has  no  right  to  demand  interest  for  the  extended  time. 

Delivery  Day.  Among  those  trading  in  grain,  for  future 
delivery,  the  first  trading  or  business  day  of  the  month  is  so 


124  MONEY    AND    INVESTMENTS 

known.  The  "  seller's  option  "  feature,  however,  permits  of 
delivery  on  any  business  day  of  the  month  for  which  the  sale 
was  made.  All  contracts  for  future  delivery  are  "  seller's 
option  "  (see  that  subject). 

Delivery  Price.    See  "  Stock  Exchange  Clearing-House." 

Demand  Bills.  Bills  of  exchange  (see  "Exchange")  pay- 
able on  demand;  on  presentation.  Practically  the  same  as  a 
"  sight  bill."  For  exception  see  that  subject. 

Demand  Collateral  Paper.     See  "  Collateral." 

Demand  Draft.     See  "  Draft." 

Demand  Exchange.    See  "  Demand  Bills." 

Demand  Loan.     A  form  of  note  or  promise  to  pay,  the 
borrower  having  the  right  to  pay  off  the  loan  at  any  time  — 
presumably  not  the  same  day  it  is  made  —  and  likewise  the 
lender  the  right   to   demand   payment,   Sundays   and   legal 
holidays  being  excepted  in  each  case. 

In  New  York  the  custom  prevails  for  parties  to  demand 
loans  either  wishing  to  make  or  receive  payment,  to  give  notice 
to  that  effect  before  one  o'clock  p.  M.,  and  for  payment  to  be 
made  before  2.15  P.  M.  that  same  day.  It  is  not  customary  to 
call  loans  there  on  Saturday,  Friday  loans  carrying  over  until 
Monday.  In  that  State  any  rate  of  interest  is  permitted  on 
collateral  call  loans  of  $5,000  or  upwards. 

Unless  written  otherwise  in  the  note,  a  "  demand  note  " 
bears  legal  interest  after  demand  for  payment  has  been  made; 
it  is  payable  on  presentation  without  "  grace."  The  laws 
differ  in  various  States  as  to  the  length  of  time  an  indorser  is 
held  on  a  "  demand  note,"  but  generally  for  a  limited  time  only. 

Rate  of  interest  may  be  stated  in  a  note  of  this  nature,  but 
it  is  quite  customary  for  borrowers  of  "  call  money  "  (as  it  is 
otherwise  known)  to  have  no  stipulated  agreement  as  to  the 
rate  with  the  lender,  his  charge  for  interest  varying  from 
time  to  time  in  accordance  with  the  money  market.  In  case 
of  any  change  it  is  customary  for  the  holder  of  the  note  to 
notify  the  borrower  of  the  rise  or  fall  of  interest  upon  the 
loan;  such  action  being  referred  to  as  "  marking  up  rates," 
or  "  marking  down  rates."  At  times  the  rate  of  interest  may 
seem  excessive  to  the  borrowing  party  and  he  may  prefer  to 
exercise  his  right  to  pay  the  loan  off,  either  with  cash  on  hand 
or  by  borrowing  elsewhere.  In  the  latter  event,  it  is  known 
as  "  shifting  loans." 

"  Demand,"  or  as  they  are  more  commonly  termed,  "  call 
loans,"  are  at  present  mostly  made  by  bankers  and  brokers 
borrowing  on  collateral  securities,  and  are  not  so  much  in 
vogue  among  other  classes  of  borrowers.1 

1  Conant,  Bolles,  and  others,  raise  the  question  as  to  whether,  in  times 
when  banks  may  suddenly  be  called  upon  to  return  large  amounts  of  money 


MONEY    AND    INVESTMENTS  125 

Demand  Sterling.  Demand  exchange  on  London.  (See 
"  Exchange.") 

Demurrage.  When  any  vehicle  of  transportation,  such  as  a 
car  or  vessel,  is  detained  beyond  the  time  allowed,  either  for 
loading  or  unloading,  a  per  diem  charge  called  "  demurrage  " 
is  made. 

Denationalizing  the  Currency.  If  the  Government  should 
withdraw  its  issue  of  "  greenbacks  "  and  place  the  issuing  of 
paper  money  more  in  the  control  of  the  banks,  that  would  be 
a  step  toward  "  denationalizing  the  "  currency." 

Denomination.  The  face  value  of  a  bond.  Most  bonds  are 
issued  in  the  "  denomination  "  of  $1,000,  although  the  $500 
and  $100  "  denominations  "  are  not  uncommon,  and  bonds 
of  almost  every  conceivable  "  denomination "  have  been 
placed  upon  the  market  from  50  cents  up  to  $1,000  and  oc- 
casionally for  a  greater  sum  than  the  last  named;  especially 
is  this  so  in  the  case  of  registered  bonds.  Our  Government 
bonds  are  sometimes  issued  in  $50,000  pieces. 

Deposit.  The  person  who  places  money  —  or  titles  to 
money  —  securities,  or  anything  of  value,  in  the  safe-keeping 
of  a  bank,  other  corporation,  or  individual,  makes  a  "  deposit," 
and  in  the  act  of  so  doing  he  "  deposits." 

Some  essential  points  regarding  making  deposits  in  a  bank 
or  trust  company  should  be  referred  to.  In  the  first  place,  in 
sending  by  mail,  write  a  full  description  of  the  checks,  etc., 
enclosed;  that  is,  the  amount  of  each  and  the  banks  upon 
which  they  are  drawn,  and,  if  money  is  sent,  describe  it  in 
detail.  Keep  a  copy  of  the  letter. 

If  a  deposit  is  made  directly  at  the  institution,  a  deposit 
slip  or  ticket  may  be  obtained,  and  the  blanks  should  be  filled 
out  giving  the  same  general  information  as  suggested  above. 
In  the  case  of  a  deposit  of  coupons,  envelopes  to  contain  them 

to  their  depositors,  "  call  loans  "  on  collateral  security  are  as  available  as 
quick  assets  as  what  is  termed  "  commercial  paper."  The  banker  or  broker 
depends  very  much  upon  the  sale  of  the  security  behind  his  loan  for  the 
ultimate  payment  of  the  same,  and  in  times  of  great  financial  distress  it 
may  be  very  difficult  to  realize  on  anything  but  the  very  highest  grade  stocks 
and  bonds,  and  not  always  upon  them.  An  instance  pertinent  to  this  ques- 
tion arose  during  the  financial  troubles  of  '93.  A  national  bank  suddenly 
Called  upon  a  banker  for  the  repayment  of  a  large  "  call  loan  "  which  he 
had  been  carrying  with  the  institution.  He  confessed  his  utter  inability 
to  pay  it.  The  cashier  threatened  him  with  the  sale  of  his  collateral  if  pay- 
ment were  not  immediately  forthcoming,  to  which  the  banker  very  honestly 
made  the  following  reply:  "  Very  good,  I  shall  be  delighted  to  have  you 
effect  the  sale  of  the  same,  and  will  gladly  pay  you  a  commission  for  so 
doing.  I  have  been  using  every  effort  to  sell  the  securities  myself  for  a 
week  without  success."  The  banker  truly  represented  the  conditions  at 
the  time,  and  it  is  needless  to  say  that  no  further  pressure  was  brought 
upon  him  for  the  repayment  of  his  loan.  The  bank  was  obliged  to  obtain 
money  from  other  sources. 


126  MONEY    AND    INVESTMENTS 

will  usually  be  furnished  by  the  bank,  with  printed  blanks 
upon  the  outside  to  be  filled  in  by  the  depositor,  and  the 
amount  as  shown  by  the  envelopes  entered  upon  the  deposit 
ticket. 

A  word  in  regard  to  indorsing  checks  for  deposit.  The 
simplest  form  to  follow  is:  "  Pay  to  the  order  of  the  Ninth 
National  Bank  of  Portland  "  (for  example)  and  then  the 
depositor  signing  his  name  immediately  below.  (For  further 
information  upon  this  subject  see  "  Indorse  "  and  "  How  to 
Open  a  Savings  Bank  Account.") 

This  subject  needs  no  further  treatment,  except  to  remind 
those  carrying  a  deposit  "  subject  to  check  "  that  they  are 
prone  to  consider  all  checks  and  other  items  which  they  may 
deposit  in  their  bank  as  cash,  and  proceed  at  once  to  check 
against  them.  As  a  matter  of  fact,  although  banks  make  a 
habit  of  crediting  checks  at  once  to  the  depositor,  they  may 
not  themselves  get  the  benefit  of  the  money  for  some  days, 
and,  to  that  extent,  the  depositor  obtains  previous  use  of 
the  money.  Suppose,  however,  some  of  these  checks  or  other 
items  which  may  have  been  immediately  credited  to  his 
account  are  uncollectable  by  the  bank.  They  will  be  returned 
and  charged  against  the  depositor's  account;  and  so  it  is  a 
thing  to  bear  in  mind  on  the  part  of  those  who  may  be  checking 
their  accounts  down  to  the  low  point,  that  occasionally  some 
check,  etc.,  may  be  returned  unpaid,  and  an  "  overdraft  " 
possibly  result. 

Deposit  Book.    See  "  Bank-Book." 

Deposit  —  Certificate  of.    See  "  Certificate  of  Deposit." 

Depositor.  One  who  places  money  in  a  bank;  that  is,  makes 
a  deposit,  is  the  usual  meaning  in  banking  affairs;  but  a 
depositor  may  be  one  who  commits  securities,  valuable  papers, 
or  anything,  to  the  care  of  another. 

Depository  of  Public  Moneys.  See  "  United  States  De- 
pository." 

Deposits  ("  Bank  Statement ").  Deposits  as  referred  to 
under  "  Bank  Statement  "  are  somewhat  difficult  to  define 
from  the  fact  that  money  itself  to  the  full  amount  of  the  de- 
posits is  not  necessarily  understood,  for  the  reason  that  a 
man  with  a  deposit  of  $50,000  may  borrow  from  the  same 
bank  $25,000,  which,  instead  of  being  paid  to  him  in  cash,  will 
be  credited  to  his  account,  swelling  it  to  $75,000.  One-third 
of  this  amount,  therefore,  certainly  is  not  cash,  and  the 
increase  in  the  deposit  does  not  increase  the  bank's  money 
holdings.  This  explains  why  an  increase  in  deposits  follows 
an  expansion  of  loans.  Such  matters  are  all  based  on  credit 
and  a  due  appreciation  of  its  importance  in  connection  with 


MONEY    AND    INVESTMENTS  127 

financial  and  business  affairs  should  be  kept  constantly  in 
mind. 

The  deposits  of  the  associated  banks  of  New  York  are 
divided  so  as  to  show  separately  the  amount  to  the  credit  of 
the  Government,  and  is  itemized  as  "  United  States  Deposits  " 
(for  an  understanding  of  which  turn  to  "  United  States  De- 
pository "),  and  enables  one  to  estimate  the  "reserve"  re- 
quirements, as  explained  under  the  subject  "  Reserve." 

When  not  divided  as  above  "  deposits  "  would  include 
.everything  to  the  credit  (less  debits)  of  individuals,  firms, 
corporations,  other  banks,  and  the  Government;  in  fact 
everything  to  the  credit  of  others,  and  which  may  be  with- 
drawn. 

Deposit  Ticket  or  Slip.  Blanks  provided  by  banks  and  filled 
out  by  those  wishing  to  make  deposits  subject  to  check.  The 
depositor  writes  in  his  name,  date,  amount  of  deposit;  giving 
a  list  of  the  kind  of  money,  checks,  etc.,  deposited.  This  is 
handed,  or  sent,  to  the  bank  with  the  deposit  and  bank-book. 

Depreciated  Currency.  When  it  takes  more  than  a  like 
amount,  face  value,  of  any  kind  of  money  to  have  the  same 
purchasing  power  as  gold  coin,  the  former  is  a  "  depreciated 
currency."  The  paper  money  of  the  Confederate  States  had 
greatly  depreciated  towards  the  end  of  the  Civil  War. 

Depreciation.  In  making  up  a  statement  of  earnings  of  a 
business  or  corporation  it  is  very  easy  to  deceive  oneself  by 
not  taking  into  proper  consideration  the  falling  off  in  value 
of  the  property  on  account  of  the  wear  and  tear;  machinery 
becoming  antiquated;  reduction  of  the  life  of  the  property, 
as  in  the  case  of  a  mine,  etc.  In  examining  the  statement  of 
earnings  furnished  by  a  company  in  which  a  person  is  con- 
sidering investing  money  this  matter  of  "  depreciation " 
should  be  seriously  considered.  It  differs,  of  course,  in  dif- 
ferent industries,  but  it  is  safe  to  say  that  the  depreciation  in 
what  is  called  an  industrial  property  is  considerable.  Some 
manufacturing  concerns  make  a  point  to  set  aside  each  year 
from  their  profits  a  sum  equal  to  10%  of  the  cost  value  of  all 
the  machinery  and  6%  of  the  cost  value  of  the  buildings. 
The  question  of  charging  off  real  estate  depends  upon  the 
location,  etc.  In  street  railways  the  depreciation  is  very 
large.  This  does  not  appear  at  first,  and  in  new  roads  the  net 
earnings  are  given  as  much  larger  than  they  will  appear  later 
on  unless  there  is  an  increase  in  business.  The  wear  and  tear 
to  electric  plants  is  considerable.  In  many  classes  of  business 
which  have  been  running  years,  so  that  the  depreciation  is 
constantly  apparent,  calling  for  repairs  to  the  machinery, 
etc.,  it  may  be  a  sufficient  safeguard  to  charge  all  such  repairs, 
replacements  and  the  like  to  operating  expenses  and  create 


128  MONEY    AND    INVESTMENTS 

no  special  fund  to  cover  it,  but  it  must  be  certain  that  such 
repairs  and  replacements  are  equal  to  the  actual  depreciation. 
If  some  method  is  not  adopted  to  set  aside  from  earnings  each 
year  a  sum  to  offset  the  depreciation  of  the  property,  the 
share  and  bondholders  of  such  a  corporation  will  eventually 
find  that  they  have  had  their  investment  gradually  returned 
to  them  in  the  shape  of  dividends  and  interest,  representing 
a  piecemeal  payment  of  their  principal  sum  rather  than 
actual  profits  of  the  corporation.  Bear  in  mind  that  it  is 
always  easy  for  any  corporation,  by  a  method  of  bookkeeping, 
to  show  fictitious  earnings,  and  it  is  to  safeguard  this  very 
thing  that  a  competent  "  expert  accountant  "  should,  in  the 
majority  of  cases,  verify  the  earnings  of  a  corporation  before 
the  investor  may  safely  purchase  its  securities. 

A  distinction  is  made  between  "  depreciation  "  and  loss 
resulting  from  "  wear  and  tear,"  on  the  ground  that  no 
matter  if  a  plant  is  continually  kept  in  the  most  thorough  repair, 
the  time  is  bound  to  come  when,  on  account  of  newer  mechan- 
ical devices  and  inventions,  it  will  have  to  sooner  or  later  be 
entirely  replaced.  A  piece  of  machinery,  even  in  the  best  of 
repair,  may  be  suddenly  thrown  out  and  replaced  by  a  different 
one.  The  former  is  but  little  more  than  old  junk;  the  cost  of 
the  new  is  what  must  be  provided  for  by  a  "  depreciation 
account." 

Greene1  in  reference  to  the  depreciation  of  street  railway 
property  declares  that  "  In  the  cases  of  companies  freshly 
established  and  operating  in  large  cities,  it  may  be  assumed, 
for  the  purpose  of  a  rough  calculation,  that  the  roadbed  will 
require  a  complete  renewal  in  ten  or  twelve  years,  the  overhead 
construction  (if  the  trolley  is  used)  within  fifteen  years,  the 
electric  station  and  buildings  in  from  twenty-five  to  fifty  years, 
the  car  bodies  in  twelve  or  fifteen  years,  and  the  motor  trucks 
ten  or  twelve  years,  with  the  steam  machinery  in  fifteen  years. 
These  averages  of  life  should,  of  course,  be  extended  in  cases 
where  circumstances  would  make  such  a  test  too  severe,  as 
for  instance,  in  interurban  lines  using  the  turnpikes." 

Derogation.  As  used  in  relation  to  securities,  it  means  a 
subtraction  from  or  alteration  of  a  contract  for  the  sale  of  the 
same. 

Destroyed  Securities.  See  "  Care  of  Securities "  and 
"  Bond  of  Indemnity." 

Detroit  United.  Detroit  United  Railway  Co.  (Street  Rail- 
way.) 

Differential.  A  rate  less  than  the  regular  or  tariff  rate 
allowed  to  a  road  disadvantageously  situated,  by  a  competitor 
in  order  to  equalize  conditions  and  avoid  rate  wars. 

1  Corporation  Finance. 


MONEY    AND    INVESTMENTS  129 

Digested  Securities.    See  "  Undigested  Securities." 

Dime.  A  small  silver  coin  of  the  United  States  of  the  value 
of  one-tenth  of  a  dollar,  or  ten  cents,  containing  34.722  grains 
of  fine  silver,  and  3.858  of  alloy.  Legal  tender  in  amounts 
not  exceeding  $10. 

Dinar.  The  monetary  unit  of  Servia,  the  same  as  that  of 
the  "  Latin  Union,"  and  equivalent  to  $0.193  United  States 
money. 

Direct  Exchange.  "  Exchange  "  between  points  in  two 
different  countries  (or  two  points  in  the  same  country)  without 
the  intervention  of  a  third,  as  in  the  case  of  "  triangular 
operation." 

Direct  Obligation.  The  obligation  to  pay  on  the  part  of  the 
person,  corporation,  etc.,  named.  As  an  example,  take  the 
Baltimore  &  Ohio  R.  R.  Co.,  Southwestern  Division  bonds. 
These  are  really  a  first  mortgage  upon  certain  portions  of  the 
railroad  property,  but,  in  case  of  financial  disaster  to  the  road, 
if  there  were  not  sufficient  value  in  such  property  as  the  mort- 
gage covers,  the  Baltimore  &  Ohio  R.  R.  Co.  itself  would  be 
responsible  for  the  payment  of  the  difference.  Again,  if  the 
earnings  of  the  property  covered  by  the  mortgage  are  not 
sufficient  to  protect  the  interest  and  principal  of  the  bonds,  as 
due,  the  Baltimore  &  Ohio  R.  R.  Co.  is  liable  for  any  deficiency. 

Dis.    Short  for  "  discount." 

Disagio.     See  "  Agio." 

Discharge  of  Mortgage.    See  "  Release  of  Mortgage." 

Discount.  The  percentage  or  price  of  a  security  below  its 
par  or  face  value.  Taking  the  face  value  as  $100,  a  share  of 
stock  selling  at  95  would  be  selling  at  5%,  or  $5  per  share, 
"  discount."  The  par  value  of  various  securities  differs, 
however  (see  "  Par  "),  therefore,  it  does  not  argue  that  be- 
cause a  share  of  stock  is  quoted  at  95  it  is  selling  at  a  "  dis- 
count," for,  if  by  chance  the  face  value  of  that  share  happens 
to  be  $50,  it  would  really  be  selling  not  at  a  "  discount,"  but 
at  a  premium  of  90%.  There  are  exceptions  to  this,  however, 
for  which  see  reference  to  stock  exchange  rules  under 
"  Par." 

For  another  meaning  of  "  discount,"  see  "  Disagio,"  as 
described  under  "  Agio." 

Paper  money  is  at  a  "  discount  "  when,  in  order  to  obtain 
one  dollar  in  gold,  it  is  necessary  to  give  more  than  one  dollar 
in  paper  money.  During  war  times,  in  the  early  '60's,  it  took 
$1.25  in  paper  money  to  obtain  $1.00  in  gold. 

A  note  is  "  discounted  "  when  the  interest  upon  the  same 
is  deducted  by  the  lender  from  the  amount  loaned;  that  is, 
the  borrower  pays  the  interest  in  advance.  This  amount  of 


130  MONEY    AND    INVESTMENTS 

interest  retained  by  the  lender  is  called  the  "  discount,"  or 
"  bank  discount."  The  amount  of  money  which  the  lender 
obtains,  that  is,  the  face  of  the  note  less  the  "  discount,"  is 
called  the  "  proceeds,"  or  "  net  avails." 

By  this  method,  he  does  not  receive  a  sum  of  money  equal  to 
the  face  of  the  note,  because  the  lender  has  deducted  the 
interest.  There  is  another  plan  which  may  be  best  explained 
by  an  example:  Carlton  wishes  to  borrow  $10,000  for  six 
months  at  his  bank;  he  wishes  the  full  amount.  The  bank 
proceeds  in  this  way:  Interest  is  figured  on  the  $10,000 
for  six  months  at  the  agreed  rate,  say  5%  per  annum.  This 
would  amount  to  $300.  Then  the  interest  for  the  same  length 
of  time  is  figured  again  at  the  same  rate  on  $300,  amounting 
to  $9.  These  two  interest  amounts  are  added  to  the  $10,000, 
equalling  $10,309.  The  borrower  signs  a  note  for  that  amount 
and  in  return  receives  $10,000.  When  the  note  becomes  due, 
he  pays  $10,309.  Therefore,  the  amount  of  "  discount,"  or 
interest  deducted  by  the  bank,  amounts  to  $309. 

There  is  another  method  of  figuring  this,  which  is  more 
favourable  to  the  borrower  than  the  above.  It  is  to  find  the 
interest,  i.  e.  the  "  discount,"  on  $1  for  the  time  and  rate, 
which,  in  this  case  would  be  2£  cents.  Deducting  this  from 
$1  you  get  $.975  as  the  "  proceeds "  of  $1  after  deducting 
the  "  discount."  As  $10,000  is  the  amount  of  money  which 
Carlton  desires,  you  divide  $10,000  by  $.975,  the  "  proceeds  " 
of  $1,  and  get  a  result  of  $10,256.41,  which  is  the  amount 
discounted  at  5%  for  six  months,  which  will  produce  $10,000, 
the  required  amount.  It  will  be  seen  that  this  method  favours 
the  borrower  to  the  extent  of  $52.59  in  this  particular 
case. 

Another  question  which  often  arises  having  a  bearing  upon 
this  subject  is  best  explained  by  an  example:  Wilson  holds 
a  ninety-day  note  for  $1,000,  dated  June  5th,  "  with  interest  " 
at  5%;  namely,  interest  payable  at  maturity,  not  deducted, 
as  in  the  case  of  "  discount."  On  August  5th  he  has  sudden 
call  for  the  money  and  goes  to  his  bank  and  "  discounts  " 
the  note  for  the  balance  of  the  time  which  it  has  to  run. 
The  "  proceeds  "  is  figured  after  this  fashion:  Wilson  is 
entitled  to  the  interest  on  the  note  for  the  time  he  has  held  it, 
which  fact  must  not  be  lost  sight  of.  The  face  of  this  note 
then  is  really  $1,000,  plus  the  amount  of  interest  from  date 
of  issue  to  date  of  maturity;  that  is,  ninety  days,  which  at 
5%  would  be  $12.33  (New  York  method  — see  "Interest"), 
making  a  total  face,  for  the  purpose  of  figuring  the  discount, 
of  $1,012.33.  It  is  now  necessary  to  ascertain  when  the  note 
matures.  If  it  had  read  due  in  "  three  months  after  date," 
September  5th  would  have  been  the  date  of  maturity,  but  as 
it  is  due  "  ninety  days  after  date  "  you  proceed  in  this  way: 


MONEY    AND    INVESTMENTS  131 

90  days  from  June  5th,  -f-  5  90  =  95 
Less  days  in  June  30 


65 
"      "      "  July  31 

34 

"       "     "  August  31 


"      "      " 


September 


making  the  note  due  September  3d  and  not  the  5th,  as  would 
have  been  the  case  had  the  note  read  due  in  "  three  months 
after  date."  Note  this  distinction,  as  it  is  continually  arising. 
The  note,  therefore,  matures  September  3d.  "  Discount  " 
must  be  figured,  then,  from  August  5th  to  September  3d,  as 
follows: 

Number  of  days  in  August  =  31 
Less  days  passed  in  August       5 

26 
Add  number  of  days  in  Sept.    3 

29 

The  "  discount  "  will  be  figured  on  $1,012.33  at  5%  for 
twenty-nine  days,  which  amounts  to  $3.97.  Wilson  will 
receive,  therefore,  $1,012.33  less  this  last  amount,  or  $1,008.36. 
The  main  point  here  is  that  to  figure  the  "  discount  "  on  a 
note  after  its  date  and  during  its  life,  which  note  was  made 
payable  "  with  interest,"  the  amount  of  interest  is  added  to 
the  face  of  the  note  and  upon  that  sum  the  "  discount  "  is 
figured  for  the  unmatured  time. 

In  Great  Britain  and  Continental  Europe,  the  term  "  dis- 
count "  is  very  generally  used  as  the  equivalent  of  our  "  time 
money." 

(See  "  Bank  Discount  "  and  "  True  Discount.") 

Many  things  are  "  discounted  "  in  the  stock  market  and  in 
general  business-dealings.  When  something  expected  to  take 
place  in  the  future  is  reckoned  upon  in  advance,  and  acted 
upon  accordingly,  the  event  is  "  discounted."  As  an  example: 
Suppose,  previous  to  a  presidential  election,  stocks  are  selling 
at  comparatively  low  figures,  and  it  is  thought  that  the  election 
of  a  certain  one  of  the  candidates  would  be  beneficial  to  general 
prosperity,  and  that  if  such  an  election  should  be  realized 
stocks  would  consequently  advance  in  price.  This  fact  is 
"  discounted  "  when  the  belief  of  the  election  is  so  certain 
that  the  advance  in  stocks  takes  place  some  time  previous  to 
the  actual  election. 

Discount  Clerk.    A  clerk  only  especially  employed  by  the 


132  MONEY    AND    INVESTMENTS 

larger  banking  institutions.  He  attends  to  all  "  discounted  " 
paper;  figures  and  makes  payment  to  the  borrower  after 
acceptance  by  the  bank;  keeps  record  of  bills  receivable; 
is  the  custodian  of  the  same,  and  obtains  and  keeps  track  of 
much  information  very  necessary  to  the  officers  of  a  bank  in 
relation  to  its  loans. 

Discount  Day.  Some  stated  day  of  the  week  upon  which 
a  bank  "  discounts  "  bills  or  notes. 

Discounted.  In  the  sense  of  anticipating  an  event.  (See 
last  paragraph  of  "  Discount.") 

Discount  Rate.  (First  read  "  Discount.")  The  "  dis- 
count rate  "  or  the  rate  of  discount  is  the  rate  of  interest 
deducted  in  advance  from  the  face  of  a  promissory  note.  In 
other  words,  if  the  "  discount  rate  "  is  5%,  the  face  of  the 
note  $1,000,  the  time  which  it  has  to  run  six  months,  2£%, 
or  $25,  is  deducted  from  the  face  of  the  note,  the  bearer  re- 
ceiving, therefore,  but  $975.  When  the  loan  matures,  how- 
ever, $1,000  must  be  repaid. 

Discount  Rates.  The  rates  at  which  first-class  paper  is 
being  "  discounted."  (See  "  Discount  "  and  "  Bank  of 
England  Discount  Rate.") 

Discretionary  Accounts.  Accounts  in  which  the  buying  and 
selling,  the  price,  and  the  choice  of  the  stock  are  left  entirely 
to  the  broker.  Beware  of  them!  Look  out  for  advertisements 
of  such!  They  ask  the  gullible  public  to  send  in  its  money; 
that  the  advertisers  know  just  what  the  market  is  going  to  do, 
and  if  money  is  sent  to  them  and  left  entirely  to  their  dis- 
cretion as  to  its  expenditure,  untold  wealth  will  roll  in  to  the 
senders. 

The  quickest  way  to  force  the  utter  absurdity  of  such 
statements  upon  the  minds  of  those  who  are  hunting  for  op- 
portunities to  separate  themselves  with  great  rapidity  from 
their  money,  is  to  make  known  the  fact  that  no  stock  exchange 
member  is  allowed  to  advertise  the  taking  of  such  accounts. 

Discretionary  Order.  The  nature  of  such  an  order  is  ex- 
plained by  the  last  subject.  One  given  a  legitimate  broker  is 
usually,  and  always  should  be,  accepted  with  hesitation. 
It  is  not  good  policy  to  either  give  or  receive  "  discretionary 
orders  "  as  it  places  too  much  responsibility  upon  the  broker. 

Discretionary  Pool.  For  all  practical  purposes  the  same 
thing  as  a  "  blind  pool;  "  at  least,  the  one  in  control  is  allowed 
entire  freedom  to  do  as  he  sees  fit  with  the  interests  of  all. 

Dishonour.  A  failure  to  pay  as  agreed;  a  refusal  to  accept 
a  draft  or  a  bill  of  exchange. 

Dishonour,  Notice  of.    See  "  Notice  of  Dishonour." 

Distillers.    Distiller  Securities  Corporation. 


MONEY    AND   INVESTMENTS  133 

District  of  Columbia  Bonds.  The  bonds  of  the  District  of 
Columbia  bear  3.65%,  for  the  payment  of  which  —  principal 
and  interest  —  taxes  are  levied  upon  the  property  within  said 
District.  But  the  faith  of  the  United  States  is  also  pledged 
for  the  payment  of  these  securities,  so  they  are  considered 
United  States  Government  bonds. 

Div.     Division  or  dividend. 

Dividend.  This  is  the  proportion  of  the  earnings  of  a  cor- 
poration received  by  the  owners  of  its  stock,  and  represents 
to  them  their  profits  in  the  enterprise.  These  profits  are  dis- 
tributed in  proportion  to  the  par  value  of  the  stock.  Suppose 
that  a  corporation  with  $100,000  capital  enjoyed  prosperous 
business  and  at  the  end  of  six  months  or  a  year  had  earned 
$15,000  in  the  way  of  profits.  The  directors  of  the  corporation 
meet  and  decide  that  they  will  divide  among  the  stockholders 
$10,000.  Each  holder  of  one  share  of  stock  (supposing  the 
par  value  of  such  share  to  be  $100)  receives  $10,  which  would 
be  called  a  "  dividend  of  10%;  "  this  would  leave  $5,000  still 
in  the  business  of  the  corporation,  which  it  had  not  divided 
among  the  stockholders.  This  could  be  treated  in  two  ways; 
left  on  the  books  as  "  undivided  profits,"  that  is,  profits  which 
might  be  divided  at  some  later  time,  or  even  possibly  the 
following  year,  provided  the  earnings  of  that  year  did  not  come 
up  to  the  expectations;  or  it  could  be  treated  as  a  surplus  fund 
and  called  "  surplus." 

By  this  latter  method  it  would  be  almost  equivalent  to  an 
increase  in  the  capital  stock,  and  would  represent,  in  this 
case,  5%  of  such  capital;  each  owner,  therefore,  would  have 
the  right  to  value  his  stock  for  that  much  more  accordingly. 
Of  course,  the  distinction  between  "  undivided  profits  "  and 
"  surplus  "  is  largely  a  matter  of  bookkeeping,  but  when  put 
under  the  latter  heading  it  gives  rather  a  better  impression, 
and  lets  the  corporation  enjoy  a  somewhat  better  standing 
than  as  if  classed  under  "  undivided  profits;  "  for  under  the 
heading  of  "  surplus  "  it  indicates  to  the  public  at  large  an 
inclination  on  the  part  of  the  corporation  to  build  up  its 
capital  rather  than  to  divide  up  all  its  earnings. 

When  the  creditors  of  a  bankrupt  receive  payments  they 
are  called  "  dividends;  "  payments  made  from  time  to  time 
to  the  depositors  of  a  bank  in  liquidation,  or  to  the  share- 
holders of  the  same,  are  "  dividends."  There  are  a  great 
many  applications  of  this  word. 

The  "  dividends  "  of  the  earnings  of  any  corporation  are 
usually  declared  or  paid  at  stated  intervals;  for  instance,  the 
first  of  January  and  the  first  of  July  of  each  year.  If  no 
"  dividend "  should  be  declared  during  the  July  period, 
with  no  intent  of  declaring  any  before  the  next  fixed  date, 


134 

which  would  be  January,  the  July  "  dividend  "  would  be 
said  to  have  been  "  passed,"  or  in  other  words,  the  company 
had  "  passed  its  dividend." 

Unless  otherwise  stated  by  the  corporation  declaring  it,  a 
dividend  is  presumed  to  be  —  and  should  be  —  paid  from  net 
earnings  or  profits. 

Dividend  Balance.  The  earnings  of.  a  corporation  after  de- 
ducting operating  expenses  of  every  kind,  taxes,  insurance, 
any  expenditures  charged  against  operating,  interest  on  float- 
ing and  bonded  debt,  and  amount  set  aside  for  sinking  fund. 
In  other  words,  the  earnings  of  a  corporation  which  are  avail- 
able for  dividends. 

Dividend,  Extra.  The  majority  of  corporations  have  estab- 
lished fixed  rates  of  dividends  upon  their  stocks.  These  are 
known  as  "  regular  dividends."  Anything  over  and  above 
this  rate  may  be  styled  an  "  extra  dividend." 

Dividend  in  Liquidation.  When  a  business  or  industry  of 
any  kind  is  being  wound  up,  closed  out,  "  liquidated,"  and 
money  paid  from  time  to  time  to  those  to  whom  it  is  due, 
the  creditors,  stockholders,  owners  of  the  business,  depositors 
(in  case  of  a  bank),  etc.,  these  payments  are  called  "  divi- 
dends in  (process  of)  liquidation." 

Dividend  Off.  The  sale  of  a  stock  with  the  agreement 
that  the  dividend  about  to  be  paid  shall  not  go  to  the  buyer; 
or  that  the  buyer  of  a  stock  is  not  entitled  to  the  next  dividend 
paid. 

When  a  company  declares  a  dividend,  it  usually  fixes  a  day 
upon  which  its  transfer  books  shall  be  closed.  From  this 
time,  until  the  books  are  again  opened,  no  transfers  can  be 
effected.  (See  "  Books  Close.") 

Dividend  On.  The  sale  of  a  stock  with  the  agreement  that 
the  dividend  about  to  be  paid  shall  go  to  the  buyer;  or  that 
the  buyer  of  a  stock  is  entitled  to  the  next  dividend  paid. 

Dividend,  Stock.     See  "  Stock  Dividend." 

Dividend  Warrant.  An  order  for  the  payment  of  a  dividend 
to  a  shareholder  is  what  is  commonly  understood,  although 
there  have  been  other  applications  of  the  term.  In  England 
a  "  dividend  warrant  "  is  a  check  for  the  payment  of  the 
dividend. 

Divisional  (or  Division)  Bond.  A  railway  issue  secured  by 
a  mortgage  upon  a  division  and  not  upon  the  entire  property, 
but,  as  a  rule,  the  direct  obligation  of  the  railway  company 
itself.  A  "  divisional  bond,"  however,  may  cover  a  property 
afterwards  taken  into  a  consolidation.  In  that  sense  the 
term  is  merely  used  to  distinguish  such  a  bond  issue  from  one 
upon  the  consolidated  property,  and  would  not,  in  that  case, 


MONEY    AND    INVESTMENTS  135 

probably  bear  the  promise  to  pay  of  the  latter.  (See  "  Con- 
solidated Mortgage  Bond.")  A  "  divisional  bond  "  may  bear 
the  guaranty  of  the  parent  company,  but  an  investor  should 
not  allow  himself  to  feel  secure  merely  on  that  alone,  but 
should  always  consider  the  actual  value  of  the  property 
mortgaged;  in  other  words,  should  judge  the  "  divisional 
bond  "  purely  upon  its  own  merits,  irrespective  of  the  guar- 
anty. Should  the  "  division "  not  prove  valuable  to  the 
main  line,  the  guaranty  might  turn  out  to  be  worthless  when 
demand  for  payment  should  be  made  of  the  "  parent  com- 
pany "  as  has  frequently  proved  to  be  the  case. 

Divisional  Mortgage.    See  last  subject. 

Dls.   The  sign  adopted  in  Mexico  for  our  American  "  dollar." 

D.  M.  J.  S.  December,  March,  June,  and  September; 
interest  or  dividends  payable  quarterly  beginning  with 
December. 

Documentary  Acceptances.  See  "  Acceptance  "  and  "  Doc- 
umentary Bill. 

Documentary  (or  Documental)  Bill.  A  "  bill  of  exchange  " 
(to  which  refer)  accompanied  by  a  "  bill  of  lading,"  insurance 
policy,  and  invoice  covering  the  shipment  of  goods,  and  which 
papers  show  the  security  which  is  behind  the  bill  of  exchange. 
In  the  case  of  a  shipment  of  cotton  or  grain,  certificates  of 
inspection  may  be  among  the  papers.  (See  "  Documentary 
Commercial  Bill.") 

Documentary  Commercial  Bill.  Some  financiers  distinguish 
between  this  subject  and  a  "  documentary  bill  "  (to  which 
refer)  by  considering  the  former  as  being  used  in  case  of  a 
shipment  of  merchandise,  manufacture,  or  produce,  and  the 
latter  in  the  event  of  other  property,  such,  for  example,  as 
securities;  but  custom  would  seem  to  designate  a  bill  drawn 
against  the  shipment  of  stocks,  bonds,  etc.,  as  a  "  security 
bill."  "  Documentary  bills  "  of  all  kinds  and  "  documentary 
commercial  bills  "  are  usually  classed  under  the  one  heading 
of  "  Documentary  Bills." 

Documentary  Rates.  The  rates  of  "  exchange  "  charged 
by  exchange  dealers  for  "  commercial  "  and  "  banker's  bills." 
(See  subjects  in  quotations.) 

Documents.  Papers  accompanying  a  bill  of  exchange 
against  a  shipment  of  merchandise,  and  include,  usually,  the 
invoice,  insurance  certificate,  and  bill  of  lading.  All  or  any 
of  the  following  may  also  be  included:  certificate  of  in- 
spection, certificate  of  origin,  consular  certificate,  and  letter 
of  hypothecation. 

Documents  for  Acceptance.  Used  in  connection  with  the 
"  documentary  bill  "  of  exchange,  indicating  that  the  bill 


136  MONEY    AND    INVESTMENTS 

of  lading,  etc.,  must  be  delivered  immediately  upon  the 
"  acceptance  "  of  the  draft,  by  which  it  is  understood  that 
the  "  acceptor  "  will  pay  the  draft  when  due. 

Documents  for  Payment.  Used  in  connection  with  the 
"  documentary  bill  "  of  exchange,  indicating  that  the  bill  of 
lading,  etc.,  must  not  be  delivered  until  after  the  payment 
of  the  draft. 

Dollar.  This  is  the  unit  of  value  not  only  of  the  United 
States,  but  of  several  other  countries. 

The  United  States  "  dollar  "  *  must  contain  25.8  grains  of 
standard  gold,  .900  fine;  the  amount  of  fine  goldlDeing  23.22 
grains,  the  remainder  of  the  weight  being  an  alloy  of  copper. 
Although  the  gold  dollar  is  actually  the  unit  and  standard  of 
value,  its  coinage  was  discontinued  under  authority  of  the 
Act  of  September  26,  1890,  and  the  only  coined  dollar  which 
we  have  in  general  circulation  at  present  is  of  silver,  con- 
taing  412£  grains  of  standard  silver,  .900  fine,  or  371£  grains 
of  fine  silver,  the  balance,  41  £  grains,  being  a  copper  alloy. 

The  dollar  of  British  Honduras,  Liberia,  and  Columbia  is 
of  equal  value  to  our  own;  that  of  the  British  possessions  in 
North  America,  except  Newfoundland,  the  same,  the  latter 
being  equal  to  $1.014  United  States  money.  In  Hong-Kong 
there  are  various  dollars  in  circulation,  the  Hong-Kong 
dollar,  so  called,  and  the  British  dollar,  both  equal  —  April  1, 
1906  —  to  $.515;  also  Mexican  dollars,  equal  to  $0.519  United 
States  money.  These  being  silver  dollars,  however,  their 
value  in  our  coinage  fluctuates  with  the  market  price  of 
silver. 

Dollar  Bond.  Read  "  Dollar  Stock,"  substituting  "  bond  " 
for  "  stock." 

Dollar  Credits.  (See  "  Circular  Letter  of  Credit.") 
"  Credits  "  for  use  in  countries  where  the  dollar  is  the  mone- 
tary unit. 

Dollar  Exchange.    "  Exchange  "  drawn  payable  in  dollars. 

Dollar  Stock.  The  English  term  for  a  stock  of  a  face  value 
of  so  many  dollars,  —  American  stocks,  —  distinguished  from 
stocks  representing  "  pounds  sterling,"  etc. 

Domestic  Exchange.  (See  "  Exchange.")  Quotations  of 
"  domestic  exchange  "  are  almost  always  in  cents  per  $1,000. 
"  New  York  exchange  at  Chicago  40  c.  premium  "  indicates 
that  $1,000  in  New  York  exchange  will  cost  $1,000.40  at 
Chicago.  Sometimes  quotations  are  in  cents  per  $100,  as  in 
case  of  exchange  between  New  York  and  San  Francisco. 

1  Thomas  Jefferson  is  responsible  for  the  selection  of  the  "  dollar  "  as 
our  unit;  in  fact,  for  our  present  system  of  coinage  which  succeeded  the 
English  pounds,  shillings,  etc.  —  See  Life  of  Thomas  Jefferson  by  John 
T.  Morse,  Jr. 


MONEY    AND    INVESTMENTS  137 

Domestic  Traveler's  Letters  of    Credit.     See  "  Letter  of 

Credit." 

Domiliciated.  Any  instrument,  such  as  a  note  or  draft, 
which  calls  for  payment  at  some  distant  point  from  that  in 
which  it  is  drawn,  is  said  to  be  "  domiciliated  "  in  its  place 
of  payment. 

Double-Eagle.  The  twenty  dollar  gold  coin  of  the  United 
States,  containing  464.40  grains  of  fine  gold,  and  51.60  grains 
of  alloy.  Ending  June  30,  1904,  these  had  been  coined  to  the 
amount  of  $1,850,281,960. 

Double  Entry  Bookkeeping.  By  "  double  entry  "  the  ledger 
accounts  show  at  least  two  entries,  one  to  the  debit  side  of 
some  account  and  the  other  to  the  credit  of  some  other  ac- 
count. In  other  words,  the  accounts  are  of  two  kinds,  per- 
sonal accounts  with  the  parties  with  whom  transactions  are 
had,  and  book  accounts,  in  which  the  commodities  or  securi- 
ties dealt  in  are  made  the  subjects  of  separate  accounts,  and 
these  have  a  credit  and  debit  side,  as  in  the  case  of  the  personal 
accounts. 

A  greater  number  of  books  is  required  by  this  system  than 
by  "  single  entry  bookkeeping  "  (to  which  subject  refer),  but 
they  may  vary,  according  to  the  custom  of  the  individual 
bookkeeper.  Such  books  are  used  as  Stock  Book,  Cash  Book, 
Bill  Book,  Sales  Book,  Invoice  Book,  Journal  and  Ledger. 

Double  Liability.  (See  "  Non- Assessable.")  Corporations 
in  which  shareholders  can  be  lawfully  held  individually  re- 
sponsible, not  one  for  the  other,  but  equally  and  ratably, 
for  all  obligations  of  the  corporation,  to  an  amount  equal  to 
the  face  value  of  such  shares;  this  in  addition  to  the  amount 
already  invested  therein.  The  shareholders  of  a  corporation 
of  this  nature,  with  a  capital  stock  of  $100,000,  can  be  held 
liable,  as  above,  for  an  additional  $100,000.  All  our  national 
banks,  except  two,1  and  certain  other  banking  institutions 
chartered  under  many  of  the  States  are  examples. 

1  Section  5151  of  the  Revised  Statutes  of  the  United  States  in  relation 
to  personal  liability  of  shareholders  reads,  in  part,  as  follows:  .  .  .  "except 
that  shareholders  of  any  banking  association  now  existing  under  State  laws 
having  not  less  than  five  millions  of  dollars  of  capital  actually  paid  in  and 
a  surplus  of  twenty  per  centum  on  hand,  both  to  be  determined  by  the 
Comptroller  of  the  Currency,  shall  be  liable  only  to  the  amount  invested 
in  their  shares;  and  such  surplus  of  twenty  per  centum  shall  be  kept  un- 
diminished,  and  be  in  addition  to  the  surplus  provided  for  in  this  Title." 

By  this  it  would  seem  that  the  shareholders  of  the  American  Exchange 
National  Bank  and  the  National  Bank  of  Commerce,  both  of  New  York 
City,  are  entitled  to  this  exemption  from  "  double  liability  "  as  when  these 
banks  were  converted  into  national  from  State  institutions,  they  met  this 
part  of  the  requirement  of  the  act.  Nevertheless,  the  Congressional  Globe 
of  April  26,  1864,  in  giving  the  discussion  in  Congress  upon  this  act,  shows 
that  Senator  Sherman  said  that  it  would  "  exempt  the  Bank  of  Commerce 
and  no  other  bank." 


138  MONEY    AND    INVESTMENTS 

A  stockholder  in  an  insolvent  institution  of  this  kind  might 
not  be  called  upon  for  the  full  amount  of  his  liability,  it  all 
depending  upon  the  magnitude  of  the  losses  of  the  institution. 
Very  frequently  no  additional  sum  is  called  for  at  all,  but  part 
of  the  original  investment  may  be  returned  the  stockholder 
in  the  shape  of  cash.  In  the  former  case  he  pays  an  "  assess- 
ment; "  in  the  latter  case,  he  receives  a  "  dividend  in  liqui- 
dation." 

A  recent  United  States  Supreme  Court  decision  is  of  interest 
as  touching  this  subject.  It  establishes  the  fact  that  statutes 
of  limitation  by  which  a  debtor  would  be  cleared  under  State 
laws,  in  a  certain  number  of  years,  do  not  affect  the  liability 
of  stockholders  of  national  banks,  which  are  chartered  under 
federal  laws. 

Double-Name  Paper.    Same  as  "  Two-Name  Paper." 

Double  Option.  By  this  is  meant  a  "  straddle,"  a  "  put  of 
more,"  or  a  "  call  of  more,"  to  which  subjects  refer. 

Double  Standard.  This  is  "bimetallism"  (to  which  refer) 
with  the  free  coinage  part  omitted. 

Double  Taxation.  What  better  illustration  of  double  taxa- 
tion can  be  given  than  the  following: 

Suppose  I  own  a  hotel  property  in  Chicago.  My  place  of 
residence  is  in  some  other  State,  where  I  pay  taxes  on  my 
personal  property.  For  my  own  reasons  I  have  chosen  to 
form  a  corporation  for  the  purpose  of  capitalizing  the  property 
at  exactly  its  cost  to  me,  which  we  will  call  $100,QOO.  I  issue 
$50,000  in  stock  and  $50,000  in  bonds.  Every  one  of  these 
bonds  belong  to  me,  and  every  share  of  the  stock  except  the 
few  shares  which  may  be  required  to  qualify  the  other  direct- 
ors. To  all  intents  and  purposes  I  own,  through  the  stock 
and  bonds,  the  entire  property.  Now,  by  the  double  taxation 
method  in  the  State  in  which  I  reside,  these  securities  are 
taxable.  Therefore,  by  my  ownership  of  the  hotel  property 
being  represented  by  stock  and  bonds,  I  am  obliged  to  pay 
taxes  upon  it  in  the  State  in  which  I  live.  I  must  also  pay 
taxes  on  the  real  estate  itself  in  Chicago.  Now  let  us  suppose 
that  I  had  not  chosen  to  capitalize  this  property,  but  merely 
owned  it  as  one  owns  any  piece  of  real  estate.  In  such  an 
event  I  should  not  be  obliged  to  pay  taxes  upon  it  in  my 
State  of  residence,  but  only  in  Chicago.  Does  not  this,  al- 
though an  extreme  example,  set  forth  the  injustice  of  double 
taxation?  It  makes  no  difference  whether  one  person  owns 
the  entire  property,  or  practically  so,  or  whether  it  is  divided 
among  numerous  owners.  The  result  would  be  just  the  same 
if  their  ownership  were  represented  in  stock  and  bonds 
in  the  one  case,  or  by  joint  ownership  of  the  real  estate  in 
the  other.  (See  "  Non-Taxable  Investments.") 


MONEY    AND    INVESTMENTS  139 

Double  Up.  An  example  would  be:  First,  the  owner  of  a 
stock  sees  the  price  decline  and  thinks  it  will  go  still  lower; 
he  sells  out;  takes  his  loss;  and  goes  "  short  "  (see  "  Selling 
Short  ")  for  a  like  number  of  shares  with  the  hope  of  getting 
even  again.  Second,  a  loss  is  incurred;  the  loser  speculates 
again;  this  time  for  twice  the  number  of  shares,  with  the 
hope  of  getting  back  his  loss  and  a  profit  besides. 

d/p.  Stands  for  "Documents  for  Payment,"  to  which 
subject  refer. 

Dr.    "  Debit."  or  "  Debtor." 

Drachma.  The  monetary  unit  of  Greece,  being  equal  to  the 
French  "  franc,"  or  $0.193  United  States  money. 

Draft.  An  order  in  writing  from  one  person  to  another  to 
pay  to  the  order  of  a  third  person  a  stated  sum  of  money. 
The  difference  between  a  draft  and  a  check,  generally  speaking, 
is  that  the  former  is  an  order  given  by  one  person  instructing 
another  to  pay  money  to  a  third;  or,  in  any  event,  it  is  an  order 
upon  a  person  for  money  and  not,  usually,  upon  a  bank,  as  in 
the  case  of  a  check,  the  latter  being  an  order  against  one's  own 
funds;  a  draft  an  order  against  another  party  for  money  due. 

FORM  OF  DRAFT 

Buffalo,  N.  Y.,  Jan.  1,  1907. 
$500. 

At  sight Pay  to  the 

Order  of  The  Electric  National  Bank 

Five  Hundred TQs°g  Dollars 

Value  received  and  charge  the  same  to  the  account  of 
To  Charles  Bean : 


George  Adams. 
No. 

Bean  owes  Adams  $500.  Adams  wants  to  collect  the  money. 
He  gives  his  bank  a  written  order  against  Bean  for  the  sum, 
as  in  the  example  above.  Adams,  who  writes  the  order,  is 
called  the"  drawer,"  Bean  the  "  drawee,"  and  the  bank  the 
"  payee."  If,  when  the  draft  is  presented  to  Bean  for  pay- 
ment, —  it  reading,  for  example,  "  ten  days  after  sight," 
he  writes  the  word  "  accepted  "  across  the  face  of  the  draft, 
together  with  the  date  and  his  signature,  Bean  is  called  the 
"  acceptor."  By  doing  this  Bean  has  made  the  draft  his 


140  MONEY    AND    INVESTMENTS 

own  written  promise  to  pay,  or  practically  the  same  as  a  note. 
This  is  called  an  "  acceptance." 

Very  frequently  drafts  are  drawn  payable  to  the  order  of 
the  "  drawer."  In  the  case  above  the  word  "  myself  "  would 
take  the  place  of  "  Electric  National  Bank."  Now,  however, 
as  this  draft  has  been  made  payable  to  Adams  —  the 
"  drawer "  —  he  must  indorse  it  before  it  is  negotiable. 
He  may  make  it  payable  by  indorsement  to  whomsoever  he 
pleases,  and  to  give  it  the  same  effect  as  the  above  form,  he 
would  indorse  it  in  this  manner:  "  Pay  to  the  order  of  the 
Electric  National  Bank,"  followed  by  his  signature.  It  will 
also  be  noticed  that  the  form  given  is  for  a  draft  payable 
"  at  sight,"  as  explained  further  on.  A  "  time  draft  "  would 
read,  for  instance,  "  Sixty  days  after  date,  pay  to  the  order 
of,"  etc.,  or  "  Sixty  days  after  sight,  pay  to  the  order  of,"  etc., 
the  latter  meaning  sixty  days  after  presentation  for  "  accept- 
ance." 

Drafts  are  of  two  kinds:  "  Sight  "  (or  demand)  and  "  time." 
If  the  former,  they  are  payable  on  presentation,  unless 
"  grace  "  is  allowed,  when  they  must  be  presented  for  "  accept- 
ance." (See  that  subject.)  If  "  time,"  they  are  presented 
for  "  acceptance  "  to  the  party  against  whom  drawn.  A 
notice  must  always  be  left  in  case  of  his  absence. 

The  payment  of  a  "  draft  "  is  regulated  by  the  laws  of  the 
State  where  payable. 

Drafts  may  pass  from  hand  to  hand  by  indorsement,  like 
a  note.  (Read  also  "  Commercial  Bill.")  A  "  bill  of  ex- 
change "  (which  see)  is  often  referred  to  as  a  "  draft." 

Drainage  Bonds.  In  some  Western  States  the  laws  provide 
for  the  issuing,  generally  by  districts  territorially  formed 
for  the  purpose,  of  bonds  to  raise  money  for  the  proper  drain- 
age of  such  districts,  which  bonds  are  payable  from  taxes 
levied  on  all  the  taxable  property  in  the  district.  This  is  a 
form  of  municipal  bond,  and  they  are  usually  known  as 
"  drainage  district  bonds."  A  town,  city,  or  county  may  issue 
bonds  for  drainage  purposes,  however. 

Drawee.  The  one  against  whom  a  "  draft  "  (or  "  bill  of 
exchange  ")  is  made;  the  one  named  in  it  as  the  party  ex- 
pected to  meet  its  payment. 

Drawer.  The  maker  of  a  draft,  bill  of  exchange,  or  other 
similar  paper;  the  one  signing  a  paper  calling  for  payment 
on  the  part  of  another;  the  one  who  "  draws  "  or  requests  in 
writing  the  payment  of  money. 

Drawn  Bond.  Drawn  by  lot  for  payment.  (See  "  Called 
Bonds.") 

Drive.     A  sudden  and  determined  effort  to  force  prices  down. 

Drop.    A  sudden  fall  in  prices. 


MONEY    AND    INVESTMENTS  141 

Dual  Monetary  Unit  (or  Standard).  See  "  Double  Stand- 
ard." 

Ducats.    Slang  for  "  money." 

"  Ducat  "  was  the  name  of  a  gold  coin  used  at  one  time  in 
various  European  countries.  Perhaps  we  are  more  familiar  with 
it  as  part  of  the  old  Spanish  currency,  as  we  frequently  meet 
the  expression  "  ducats  of  gold  "  in  reading  of  the  Spanish 
explorers.  Prescott,  in  his  "  Conquest  of  Mexico,"  states  that 
the  gold  "  ducat  "  at  the  close  of  the  fifteenth  century  was 
equivalent  to  $8.75  in  our  money,  but  other  writers  state  that 
the  "  ducat  "  as  commonly  in  use  in  the  different  European 
countries  varied  but  little,  being  worth  from  $2.27  to  $2.32. 
The  Century  Dictionary  and  Encyclopedia  says  that  the 
"  ducat  "  was  also  an  Austrian  weight  for  gold,  the  unit  sup- 
posed to  have  been  derived  from  the  Jews.  Various  authori- 
ties determined  it  to  be  3.490896  grams. 

Due-Bill.  A  non-interest-bearing  written  agreement  to 
deliver  the  dividend  on  stock  sold. 

A  written  acknowledgment  of  indebtedness,  which  is  neither 
made  payable  to  order,  nor  transferable  by  indorsement. 

Guaranty  issued  by  a  bank  in  place  of  a  certified  check. 

The  Comptroller  of  Currency  has  referred  to  "  clearing- 
house loan  certificates  "  as  "  due-bills." 

Due  from  (Reserve)  Agents.  This  term  is  frequently  used 
to  denote  the  amount  of  money  which  a  bank  has  on  deposit 
with  its  "  reserve  agent."  This  will  be  better  understood 
by  reading  "  New  York  Excess." 

Due  from  Banks  other  than  Reserve  Agents.  When  this 
appears  in  a  "  bank  statement,"  it  has  the  same  meaning  as 
given  under  "  Due  from  Others." 

Due  from  Others.  The  "  bank  statements  "  of  some  of  the 
cities  give  an  item  with  the  above  heading,  which  indicates 
money  on  deposit  with  other  banks  than  "  reserve  agents," 
as  referred  to  in  the  preceding  subject;  and  also  all  checks, 
etc.,  in  the  hands  of  other  banks  in  the  process  of  collection. 

Due  to  (Other)  Banks.  The  "  bank  statement"  is  fre- 
quently tabulated  in  such  form  as  to  sub-divide  the  deposits. 
"  Due  to  banks,"  therefore,  indicates  the  deposits  held  by  the 
banks,  included  in  the  statement,  to  the  credit  of  other  banks 
and  trust  companies,  not  members  of  the  clearing-house 
association,  among  which  would  be  naturally  many  country 
banks  carrying  deposits  in  either  the  "  reserve  "  or  "  central 
reserve  centres."  This  subdivision  of  deposits  does  not 
appear  in  the  New  York  Bank  Statement,  as  it  is  all  covered 
by  one  heading,  "  Deposits." 

Dull.  The  market  is  "  dull  "  when  very  little  business  is 
being  transacted. 


142  MONEY    AND    INVESTMENTS 

Dummy.  This  word  is  used  in  connection  with  director, 
stockholder,  etc.,  as  "  dummy  director,"  and  indicates  one 
who  really  acts  for  another,  but  by  so  doing  relieves  the  other 
of  liability;  or  who  is  merely  placed  in  office  to  fill  the  number 
required  by  law.  A  "  dummy  "  usually  has  little  financial 
means,  or  has  little  or  no  interest  in  the  corporation  which  he 
is  serving.  He  may  be  elected  for  a  brief  time,  to  be  later 
succeeded  by  one  personally  interested. 

Dump.  "  A  lot  of  stock  was  dumped  upon  the  market," 
meaning  that  a  great  deal  was  sold  for  the  purpose  of  getting 
rid  of  it;  that  is,  the  stock  was  undesirable,  either  on  account 
of  high  price  existing  or  for  other  reasons.  "  Dumping  " 
stock  has  reference  not  so  much  to  disposing  of  an  undesirable 
investment,  but  in  offering  the  same  in  large  amounts,  not 
in  small  amounts  from  time  to  time.  You  dump  a  lot  of 
earth  when  you  tip  up  the  cart  and  let  it  all  go  at  once. 

Dun's.     See  "  Commercial  Agencies." 

Duster.  If,  in  boring  for  an  oil  well,  no  oil  is  found,  only  a 
dry  hole,  it  is  called  a  "  duster." 

D.  &  J.     December  and   June;    interest  or  dividend  pay- 
ments semi-annually  beginning  with  December. 

E 

E.  The  "  ticker  "  abbreviation  for  East  or  Eastern. 
Eagle.     A  gold  coin  of  the  United  States  of  the  value  of 

$10,  containing  232.20  grains  of  fine  gold,  and  25.80  grains 
of  alloy.  Up  to  June  30,  1904,  these  had  been  coined  to  the 
amount  of  $378,877,070. 

Ear-Marked.  This  word  as  used  in  London  in  reference  to 
gold  means  that  it  is  held  in  the  vaults  of  the  Bank  of  England 
on  behalf  of  those  possessing  it  and  is  not  the  property  of  the 
Bank.  When  gold  is  "  ear-marked  "  it  cannot  be  used  by 
the  Bank  of  England  for  any  purpose  whatsoever.  The  Bank 
of  England  has  merely  the  safe  custody  of  it. 

The  object  of  "  ear-marking  "  gold  in  the  Bank  of  England 
on  account  of  the  Indian  Government  is  to  enable  Government 
notes  to  be  issued  in  India  secured  upon  the  gold  "  ear- 
marked "  in  London.  The  National  Bank  of  Egypt  has  fol- 
lowed a  similar  procedure  and  has  issued  notes  in  Egypt 
against  gold  "  ear-marked "  in  the  Bank  of  England  as 
security  for  those  notes.1  By  this  it  will  be  understood  that 
the  use  of  the  term  in  general  indicates  money  reserved  for  a 
specific  purpose. 

1  The  author  is  indebted  to  George  Paish,  of  London,  editor  of  The 
Statist,  for  the  foregoing  information. 


MONEY    AND    INVESTMENTS  143 

Earnest.  Money  paid  by  the  buyer  to  the  seller  to  bind  the 
trade. 

Earnings.  See  "  Gross  Earnings,"  "  Net  Earnings," 
"  Operating  Expenses." 

Eased  Off.     Declined  in  price. 

Easy  Money.  A  term  used  to  express  the  fact  that  those 
seeking  to  borrow  money  may  do  so  at  low  rates  of  interest 
and  without  much  difficulty.  In  other  words,  when  the  supply 
of  loanable  money  exceeds,  or  is  fully  equal  to,  the  demand. 

Edison.  Among  the  Boston  quotations,  Edison  Electric 
Illuminating  Co.  of  Boston  is  understood;  in  Los  Angeles, 
The  Edison  Electric  Co.  of  Los  Angeles;  in  Brooklyn,  The 
Edison  Electric  Illuminating  Co.  of  that  city,  and  so  on  ac- 
cording to  location. 

E.  E.  These  letters  stand  for  "  errors  excepted,"  and  have 
practically  the  same  significance  as  "  E.  &  O.  E." 

El.     Elevated  or  Electric. 

Elastic  Currency.  (See  "  National  Bank  Notes.")  A  kind 
of  money  that  will  expand  in  emergencies,  and  contract  when 
not  needed. 

Secretary  of  the  Treasury  Shaw  said:  "  The  only  elastic 
currency  known  to  man  is  one  based  on  credit  circula- 
tion."1 

Electric  Light  Company  Securities.  When  electric  lighting 
was  first  introduced,  it  resulted  in  depreciation  in  the  market 
price  of  gas  company  securities.  It  has  been  found,  however, 
that  gas  and  electric  light  companies  can  work  harmoniously 
together,  there  being  separate  fields  for  them  to  cover,  but 
the  superiority  of  electric  lighting  over  gas  is  bound  to  create 
for  it  a  permanent  demand.  It  is  not  uncommon  now  for  a 
man  living  in  a  small  country  town  to  be  supplied  with 
electricity  and  for  him  to  gaze  in  wonder  at  the  still  prevalent 
gas  posts  in  many  of  our  large  cities.  It  is  less  detrimental 
to  the  health  to  use  than  gas,  and  it  is  not  injurious  to  wall 
and  ceiling  decorations.  Its  safety  over  the  use  of  lamps  is 
favourable  to  its  increased  use. 

Now  that  it  has  proven  possible  to  transmit  electrical  power 
long  distances  at  small  loss,  the  investor  must  not  only  con- 
sider the  likelihood  of  competition  from  a  local  plant,  but  from 
some  plant  located  in  another  town  or  city  in  the  same  section, 
and,  therefore,  for  this  and  many  other  reasons,  it  is  desirable 
that  rates  charged  locally  shall  be  reasonable  and  satisfactory 
to  the  consumers,  so  that  there  will  be  less  temptation  for  an 
outsider  to  invade  the  territory.  There  may  be  some  exclusive 
clause  of  the  franchise  which  will  protect  the  local  company 

1  Speech  before  the  Missouri  Society  in  New  York  City,  Jan.  31, 1907. 


144  MONEY    AND    INVESTMENTS 

from  an  invasion  of  this  kind,  but  all  these  matters  are  to  be 
considered. 

Find  out  how  long  the  franchise  has  to  run.  If  it  is  a  bond 
being  considered,  the  franchise  should  always  outlive  it.  (In 
this  connection  it  would  be  well  to  turn  to  the  subject  "  Fran- 
chise.") Consider  the  earnings,  which  should  give  net  re- 
sults of  at  least  twice  the  amount  required  to  pay  the  annual 
interest  charge,  and  provide  a  moderate  sinking  fund.  A 
sinking  fund  which  will  redeem  two  or  three  per  cent,  of  the 
issue  annually  is  desirable  if  the  plant  is  located  in  the  smaller 
cities  or  towns.  In  the  larger  cities,  which  are  considered  to  be 
growing  communities,  a  sinking  fund  may  not  be  so  necessary, 
provided  the  bond  issue  does  not  exceed  60  or  70%  of  the 
replacement  value  of  the  property.  In  smaller  places,  50% 
of  the  replacement  value  of  the  property  is  large  enough  for 
a  bond  issue.  The  wear  and  tear  on  electric  lighting  properties 
is  considerable,  and  it  should  be  well  understood  by  the 
intending  investor  that  proper  sums  are  being  set  aside  yearly 
to  cover  this  depreciation;  and  this  should  be  from  the  very 
starting  of  the  plant,  because,  when  everything  is  new,  this 
wear  and  tear  is  not  apparent,  except  to  a  small  degree,  but 
the  ratio  of  this  increase  is  quite  rapid  as  the  property  grows 
older.  Consequently,  this  should  be  anticipated  in  the  be- 
ginning. It  is  very  essential  that  an  electric  light  plant  should 
be  maintained  in  a  high  physical  condition,  which  mainte- 
nance should  be  paid  for  from  its  earnings  without  any  increase 
of  indebtedness,  and  it  is  that  against  which  the  investor 
must  guard. 

Electric  light  plants  in  small  towns  are  not  desirable  sources 
for  investment,  and  are  worth  considering  at  all  only  when 
low  priced  water-power  is  obtainable,  and  in  this  connection 
it  is  wise  for  the  investor  to  read  what  is  given  under  "  Power 
Company  Bonds,"  as  relates  to  the  sufficiency  of  the  power. 

Electric  light  properties  may  be  easily  duplicated,  unless  the 
wires  are  in  underground  conduits  and  thus  occupy  a  strategic 
position  something  like  a  gas  company.  It  is  well  to  ascertain 
whether  or  no  the  municipality  has  any  right  of  purchase  at 
some  future  time,  which  might  work  to  the  disadvantage  of  a 
security  holder.  The  amount  of  business  tributary  to  the 
company  is  naturally  important,  and  especially  important 
is  the  question  of  the  contract,  if  any,  with  the  municipality, 
to  furnish  the  public  lighting.  If  this  contract  exists,  unless 
it  is  a  reasonable  contract  and  runs  as  long,  at  least,  as  the 
bond  issue,  it  should  not  be  considered  at  all  by  the  purchaser 
of  bonds,  and  should  seldom  be  considered  by  the  investor 
in  the  stocks  of  such  a  company.  At  its  expiration  it  might 
not  be  renewed,  or,  if  renewed,  upon  less  favourable  conditions. 
It  is  well  for  the  intending  purchaser  of  securities  of  a  property 


MONEY    AND    INVESTMENTS  145 

of  this  kind,  unless  with  the  above  exceptions,  to  eliminate 
the  earnings  from  the  city  contract  entirely  in  studying  the 
company's  statement  of  earnings.  (Read  also  the  subject 
"  Gas  Company  Bonds.") 

As  a  whole,  electric  light  securities  have  proved  very  satis- 
factory and  comparatively  little  loss  has  been  incurred.  It  is 
reasonable  to  suppose  that  with  all  the  modern  improvements, 
and  the  present  well-known  methods  of  handling  this  business, 
that  with  ordinary  precaution  on  the  part  of  the  investor,  safe 
investments  in  properties  of  this  kind  may  be  readily  made. 

Electric  Railway  Securities.  When  it  became  possible  to 
economically  apply  electric  power  to  the  street  railway  service, 
the  first  step  was  naturally  the  conversion  of  the  horse  pro- 
pelled cars  to  those  driven  by  electricity,  and  this  change  has 
very  generally  taken  place  throughout  the  country.  While 
there  were  roads  to  be  so  converted,  there  was  not  so  much 
attention  paid  to  constructing  new  lines.  Of  late  years,  how- 
ever, this  field  has  been  extensively  exploited,  and,  perhaps, 
in  some  instances,  too  much  so.  Although  a  vast  number  of 
roads  have  been  honestly  built  and  capitalized,  there  have 
been  construction  companies  and  promoters  who  were  so 
anxious  to  profit  from  the  building  of  electric  roads,  that  some 
ill-advised  properties  have  been  financed.  This  is  especially 
true  in  the  smaller  towns  and  sparsely  settled  sections.  This 
zeal  for  construction  is  bound,  in  such  cases,  to  result  in  some 
re-organizations.  In  many  instances,  the  impending  disaster 
may  be  averted  by  the  consolidation  with,  or  the  sale  of  the 
property  to,  a  connecting  line  of  greater  importance,  which 
can,  with  its  own  power  and  equipment,  more  economically 
conduct  the  smaller  line. 

Whereas,  as  stated  above,  there  have  been  some  ill-advised 
roads  constructed,  roads  built  where  there  is  little  business, 
little  to  support  them,  or,  as  we  might  say,  where  the  nickels 
do  not  exist  in  sufficient  quantities,  this  is  not  the  whole 
trouble.  Recent  construction  shows  a  great  contrast  to 
earlier  methods.  The  latter  allowed  the  use  of  too  light 
rails  and  much  equipment  which  is  now  out  of  date,  and  the 
construction  was  almost  exclusively  upon  the  highways. 
Modern  methods  take  all  these  matters  into  consideration. 
The  physical  condition,  such  as  grades,  curves,  general  con- 
struction, etc.,  are  all  important.  In  New  England,  the  hilly 
character  of  the  country  with  the  sharp  and  frequent  curves 
makes  it  unsafe  to  run  heavy  cars  at  express  speed.  The 
privilege  of  constructing  over  a  private  right  of  way  is  fre- 
quently difficult  to  obtain.  The  cost  for  the  removal  of  snow 
in  roads  running  upon  the  highway  is  far  greater  than  if 
operated  over  a  private  right  of  way.  In  many  sections  of  the 


146  MONEY    AND    INVESTMENTS 

country,  where  it  is  possible  to  build  long  stretches  of  road, 
practically  without  curves  and  appreciable  grades,  all  con- 
ditions incident  to  a  low  operating  cost  are  favourable. 

High  rate  of  speed  over  privately  owned  rights  of  way  is, 
where  the  natural  conditions  are  favourable,  resulting  in  the 
carrying  of  through  passengers  for  long  hauls,  and  the  trans- 
portation of  freight  to  very  profitable  ends.  It  is  continually 
bringing  electric  railways  into  stronger  competition  with  the 
steam  roads.  The  introduction  of  dining,  sleeping,  and 
drawing-room  cars  is  making  one  system  of  transportation 
more  like  the  other.  The  filling  in  of  small  links  of  road  here 
and  there  is  furnishing  the  means  for  long  distance  service, 
and,  withal,  the  electric  railway  situation  is  constantly  shaping 
itself  upon  a  permanent  basis  and  upon  different  lines,  capable 
of  a  reasonable  certainty  as  to  results. 

The  modern  inter-urban  electric  railway,  which  has  the  best 
chance  for  a  successful  future,  is  the  one  which  operates  over 
a  private  right  of  way,  and  approximates  in  its  character  the 
construction  and  equipment  of  the  standard  steam  railroads. 

The  inter-urban  electric  has  a  distinct  function,  and  it  is 
predicted  that  the  ultimate  outcome  will  be  that  these  roads 
will  do  most  of  the  short  haul  passenger  business,  and  leave 
to  the  steam  roads  the  long  haul  and  freight.  And,  further- 
more, that  many  electric  roads  feeding  into,  or  parallel  with, 
the  steam  roads  will  eventually  be  absorbed  by  the  latter. 

It  is  a  peculiar  fact,  and  recognized  by  many,  that  the 
inter-urban  road  parallelling  the  steam  road  does  not  result  in 
a  reduction  of  the  passenger  business  of  the  latter,  but  seems 
to  create  a  new  business  for  itself.  In  other  words,  it  is 
recognized  that  the  "  trolley  lines  "  "  breed"  business. 

Much  information  and  experience  have  been  gained  of  late, 
and  the  roads  now  being  constructed  are  on  a  different  scale 
and  less  likely  to  come  to  grief  than  the  earlier  ones.  Judging 
by  this,  it  is  reasonable  to  suppose  that  new  properties,  built 
according  to  modern  methods,  and  serving  populous  com- 
munities, will  prove  desirable  and  profitable  investments. 

The  question  of  equipping  steam  railroads  with  electrical 
power  has  received  consideration,  as  is  evidenced  by  steps 
taken  in  that  direction  by  the  New  York  Central  &  Hudson 
River,  and  the  New  York,  New  Haven  &  Hartford,  and  other 
railroad  companies. 

Some  of  the  things  to  consider  in  the  selecting  of  a  street 
railway  security  have  already  been  set  forth,  to  which  may  be 
added: 

The  length  of  franchise,  which,  in  the  case  of  a  bond,  or 
other  security  having  a  definite  maturity,  should  always 
outlive  it.  (See  "  Franchise.")  The  earnings  should  be  given 
careful  consideration.  Proper  charges  should  be  made  each 


MONEY    AND    INVESTMENTS  147 

year  for  improvements,  and  assurance  had  that  the  road  is 
being  maintained  in  a  high  state  of  physical  condition  from 
its  earnings,  and  that  no  new  indebtedness  is  being  created 
to  pay  for  what  is  strictly  wear  and  tear.  (In  this  connection 
it  may  be  well  for  the  reader  to  consider  the  matter  under 
"  Depreciation.")  When  a  property  of  this  kind  is  first  con- 
structed it  is  usually  in  a  high  state  of  efficiency,  and  the  road 
and  equipment  do  not  begin  to  show  visible  increased  cost  of 
maintenance  for  the  first  few  years,  thus  permitting  it  to  be 
operated  at  a  lower  cost  than  later  on  when  the  wear  and 
tear  will  become  more  apparent  and  replacements  necessary. 
A  road  giving  service  where  the  riding  is  more  or  less  for 
pleasure,  rather  than  for  necessity,  is  also  likely  to  show 
unduly  large  earnings  at  first,  owing  to  the  novelty  afforded 
the  patrons.  Thus,  the  earnings  of  a  new  road  should  be 
studied  from  this  point  of  view. 

The  power  is  all-important,  whether  it  be  purchased  or 
furnished  from  the  road's  own  plant.  The  question  is:  If 
furnished  by  water-power,  is  the  power  sufficient  for  service 
at  all  times  of  the  year,  and  has  provision  for  the  future  been 
taken  into  consideration? 

In  all  such  matters  the  opinion  of  a  well-established  expert 
engineer  should  be  furnished,  and  his  report  should  not  only 
cover  the  physical  condition  of  the  property,  but  should  enter 
with  care  into  the  business  tributary  to  the  road.  In  con- 
sidering this,  the  reader  is  asked  to  turn  to  the  subject  "  Audi- 
tor," which  treats  further  upon  this  matter. 

The  net  earnings  of  a  company  ought  to  be,  at  least,  double 
the  interest  charges;  the  mortgage  ought  not  to  exceed  75% 
of  the  replacement  value  of  the  property;  a  sinking  fund  is 
advisable,  which  it  is  well  should  become  operative  at  an 
early  date  after  the  issuance  of  the  bonds. 

Electrolytic  Copper.  That  which  is  purified  by  suspending 
it  in  an  acid  solution  and  by  an  electrical  current  disinte- 
grating it  and  re-depositing  it  upon  a  plate  without  the 
impurities.  This  copper  has  high  electrical  conductivity, 
sometimes  102%  of  that  attributed  to  chemically  pure  copper. 
It  is  not  quite  as  strong  as  the  best  "  Lake  copper." 

Elevator  Certificates.    Same  as  "  Elevator  Receipts." 

Elevator  Receipts.  (See  "  Warehouse  Receipts.")  Prac- 
tically the  same  thing,  only  issued  by  warehouses  for  the 
storage  of  grain,  called  grain  elevators,  evidencing  the  storage 
therein  of  a  certain  quantity  of  grain. 

Elm  River.     Elm  River  Copper  Co. 

Emergency  Currency.  A  form  of  money  created  to  fill  the 
needs  of  a  sudden  demand,  and  for  a  brief  period  only;  a 
form  which  can  be  put  out  and  withdrawn  with  equal  rapidity; 


148  MONEY    AND    INVESTMENTS 

money  which  can  be  easily  retired  when  the  emergency  for 
which  it  was  created  has  passed.  During  the  Civil  War  the 
Federal  Government  issued  some  short  time  —  one  or  two 
years  —  notes  bearing  interest,  which,  by  some  writers,  are 
considered  "  emergency  currency."  The  Imperial  Bank  of 
Germany  is  authorized  to  issue  an  emergency  circulation  to 
any  extent  it  pleases  in  excess  both  of  its  authorized  circula- 
tion, provided  it  holds  in  cash  (See  "  Bank  of  Germany  ") 
one-third  of  the  total  issue  of  such  notes;  but  it  must  pay 
the  Government  an  annual  tax  of  5%  upon  such  excess  of 
notes. 

Employees  Liability  Insurance.    See  "  Liability  Insurance." 

Endorse.     See  "  Indorse." 

Endowment  Life  Insurance.     See  "  Life  Insurance." 

Enforced  Liquidation.     See  "  Liquidation." 

Engagements.  "  His  engagements  amount  to  $50,000," 
meaning  his  promises  to  pay  or  contracts  to  deliver  call  for 
that  amount,  or  value. 

Engineer's  Certificate.  This  is  a  statement  over  the  signa- 
ture of  an  engineer  as  regards  the  physical  condition  of  a 
railroad  or  other  property.  This  is  further  explained  under 
the  next  subject,  but  the  wording  of  such  a  certificate  should 
be  in  form  so  as  to  show  beyond  perad venture  that  exhaustive 
examination  has  been  made  and  that  all  construction  was 
proper;  that  power,  for  example,  is  sufficient  for  the  present 
needs,  and  likely  to  do  so  for  reasonable  future  requirements; 
that,  if  a  water-power  enters  into  the  proposition,  the  supply 
of  water  is  sufficient  at  all  times,  and,  if  not,  that  proper  pro- 
vision has  been  made  for  auxiliary  power  by  the  use  of  coal, 
for  example;  and  so  on.  In  fact,  on  an  "  engineer's  report  " 
depends  so  much  that  too  great  pains  cannot  be  exercised  in 
studying  into  such  a  report  and  ascertaining  if  all  reasonable 
care  and  precautions  have  been  taken.  Let  the  engineer  be 
one  of  good  repute  and  standing,  and  let  his  report  be  sufficient 
to  set  forth  in  detail  all  necessary  information. 

It  has  become  the  custom  for  railway  and  other  public 
service  corporations  to  allow  for  an  extension  of  the  property 
by  a  further  issue  of  bonds  up  to  a  certain  rate  of  the  actual 
cost  for  such  an  extension,  all  based  upon  "  engineer's  certif- 
icates." It  is,  therefore,  of  extreme  importance  that  these 
certificates  should  properly  show  the  expenditure  of  this 
money.  It  is  not  a  bad  idea  that  an  affidavit,  signed  by  the 
president  and  treasurer  of  the  company,  should  go  with 
such  reports,  showing  them  to  be  true. 

Engineer's  Report.  A  report  by  one  who  by  previous  educa- 
tion and  experience  is  competent  to  investigate  the  physical 


MONEY    AND    INVESTMENTS  149 

condition  of  a  railroad,  electric  light,  or  such  a  property  as 
he  may  be  employed  to  report  upon. 

In  purchasing  at  first  hand  from  a  corporation  desiring  to 
sell  its  obligations,  it  is  customary  to  employ  an  expert 
engineer  to  report  upon  the  physical  condition  of  the  property 
belonging  to  the  corporation.  Let  us  take,  for  example,  a 
street  railway  whose  bonds  have  been  offered  to  a  banker  for 
purchase,  and  who  has  contracted  for  them  subject  to  the 
usual  conditions  as  to  finding  everything  as  represented. 
Among  other  experts,  a  competent  engineer  is  employed  to 
thoroughly  examine  the  machinery,  road-bed,  ties,  rails, 
overhead  construction,  rolling  stock,  etc.,  to  find  if  it  is 
thoroughly  up-to-date  and  capable  of  fulfilling  the  demands 
likely  to  be  placed  upon  it.  In  this  regard,  let  the  investor, 
among  others,  bear  this  point  in  mind:  that  the  most  favour- 
able report  from  the  best  engineer  in  the  country  certifying  to 
the  conditions  of  this  street  railway  does  not  argue  that  its 
bonds  will  prove  to  be  a  safe  investment,  because  no  matter 
how  good  a  road  is  from  a  physical  standpoint,  there  must  be 
sufficient  business  to  warrant  its  existence,  and  to  provide 
for  its  proper  maintenance  as  well  as  to  safeguard  the  interest 
and  principal  of  the  bonds.  It  is  better  to  have,  perhaps,  a 
poorly  constructed  road  running  through  a  section  furnishing 
an  enormous  amount  of  business,  which  will  provide  earnings 
to  not  only  safeguard  the  bonds,  but  enable  the  road  to  be 
later  brought  up  to  a  proper  physical  condition,  than  it  is  to 
have  the  best  road  which  engineers  can  construct  running 
through  a  country  with  inadequate  business  tributary  to  it. 
See  also  last  subject. 

English  Money  Table : 

4  farthings  =  1  penny 
12  pence        =  1  shilling  =  48  farthings 

20  shillings   —  1  pound  or  sovereign  =  240  pence  =  960  farthings 

21  shillings   =  1  guinea 

Envelope.     United  States  Envelope  Co. 
Equipment.    This  is  a  railroad  term  and  refers  to  all  rolling 
stock;   its  locomotives,  cars,  snow-plows,  hand-cars,  etc. 
Equipment  Bonds.     See  "  Equipment  Trust." 
Equipment  Certificates.    See  "  Equipment  Trust." 
Equipment  Notes.     See  "  Equipment  Trust." 
Equipment  Trust.    It  is  a  common  practice  among  railways, 
in  buying  cars,  locomotives,  etc.,  to  mortgage  the  same  and 
sell  securities  secured  by  this  mortgage  to  raise  money  for  the 
payment  of  the  equipment.    These  obligations  are  known  as 
"  equipment  bonds,"  "  equipment  notes,"  "  car  trust  certif- 
icates," "  equipment  trust  certificates,"  etc. 


150  MONEY    AND    INVESTMENTS 

A  typical  example  is  that  of  the  Southern  Railway  which 
issued  June  1,  1904,  4J%  Equipment  Trust  Gold  Certificates. 
One  hundred  and  twenty  passenger  and  freight  locomotives 
and  2,500  cars  were  mortgaged  to  secure  these  certificates. 
They  are  the  direct  obligation  of  the  Southern  Railway  Co., 
in  addition  to  being  secured  by  a  first  mortgage  upon  the 
equipment  named,  no  part  of  which  should  be  released  until 
the  entire  issue  is  paid. 

The  safety  of  such  issue  depends  largely  upon  what  propor- 
tion the  issue  bears  to  the  actual  cost  of  the  equipment,  and 
whether  or  not  it  is  to  be  paid  off  fast  enough  to  prevent  the 
equipment  mortgaged  depreciating  in  value  below  the  amount 
of  the  certificates  outstanding;  that  is,  equipment  of  this  kind 
wears  out  very  fast,  and  the  certificates  should,  therefore, 
mature  with  that  idea  in  view.  (See  also  "  Car  Trust.") 

This  form  of  short  time  obligation  has  been  looked  upon 
favourably  from  the  investment  standpoint.  It  is  stated  by 
one  financial  writer  that  no  default  in  this  country  has  ever 
yet  occurred  in  these  securities.  They  have  commonly  been 
issued  up  to  about  80%  of  the  cash  value  of  the  equipment, 
and  in  serial  form,  payable  about  10%  annually. 

Equity.  The  common  meaning  in  reference  to  investments 
is  the  value  in  the  property  over  and  above  its  indebtedness; 
for  instance,  to  the  stockholders  of  a  railroad  belongs  its 
"  equity."  In  the  case  of  a  mortgage  upon  real  estate,  the 
value  of  the  property  above  the  mortgage  would  be  the 
"  equity." 

Erie.  Erie  Railroad  Company.  Formerly  the  New  York, 
Lake  Erie  &  Western  R.  R.  Co. 

Erratic.  A  very  uncertain  condition  of  prices;  first  up  and 
then  down.  Under  these  conditions  the  stock  market  is  said 
to  be  "  erratic." 

Escrow.  The  common  use  in  banking;  anything  is  placed 
"  in  escrow  "  when,  by  mutual  agreement  between  two  parties, 
it  is  placed  in  the  hands  of  a  third  party,  to  be  held  until  the 
fulfilment  of  some  condition,  when  it  shall  be  delivered  or 
returned  in  accordance  with  the  agreement. 

Even.  A  "  broker  is  "  even  "  on  a  stock  when  he  has  con- 
tracted to  receive  and  deliver  equal  amounts  of  the  same 
stock  with  another  broker;  that  is,  inasmuch  as  he  has  sold, 
for  example,  one  hundred  shares  of  Union  Pacific  to  Robinson, 
and  later  in  the  same  day  has  bought  the  same  number  of 
shares  from  him,  there  is  no  necessity  of  either  making  a 
delivery.  A  settlement  for  the  difference  in  prices  only  is 
called  for.  This  term  is  much  in  use  in  connection  with  "  stock 
exchange  clearing-house  "  matters,  as  is  explained  under  that 
subject. 


MONEY- AND    INVESTMENTS  151 

In  London,  this  term  is  used  when  a  stock  is  carried  over  — 
as  explained  under  "  Contango  "    -  without  any  charge  being 
made  for  the  accommodation.    This  indicates  that  the  bulls 
and  bears  about  balance  each  other. 

Evening  Up.  When  those  who  are  "  long  "  of  the  market 
are  selling  out,  i.  e.  "  liquidating,"  at  the  same  time  that  the 
"  shorts  "  are  purchasing  to  cover  their  contracts,  so  that 
both  processes  are  going  on  simultaneously,  it  is  called 
"  evening  up."  (See  subjects  in  quotations.) 

Even  Lots.  A  number  of  shares  of  stocks  evenly  divisible 
by  100,  as  700,  900,  etc.,  share  lots. 

Even  Up.    To  get  back  a  loss. 

Ex.  Literally  "  out  of,"  but  as  used  in  finance,  meaning 
"  without,"  "  Ex-dividend "  is  equivalent  to  "  without 
dividend." 

Ex-All.  Meaning  that  a  security  is  sold  with  all  rights,  such 
as  dividend  due,  privilege  to  subscribe  to  new  shares,  and  all 
such  advantages,  are  reserved  to  the  seller. 

Excess  Reserve.    Meaning  the  same  as  "  surplus  reserve." 

Exchange.  Simply  expressed,  it  is  this:  White  owes  Black 
$100.  Black  likewise  owes  White  $100.  They  meet  and 
present  bills  against  each  other  for  the  amounts.  Each  re- 
ceipts his  bill  and  hands  it  to  the  other,  the  two  debts  offsetting. 
No  money  has  changed  hands.  This  is  the  simplest  form  of 
"  exchange,"  but  upon  it  is  based  its  whole  intricate  and  com- 
plicated system.  A  "  bill  of  exchange  "  is  one  of  the  earliest 
forms  of  credit. 

"  Exchange  "  is  a  method  of  effecting  payments  at  distant 
points  without  the  actual  shipment  of  money  or  bullion. 
When  these  points  are  in  different  countries,  it  is  "  foreign 
exchange  "  and  the  instrument  by  which  the  payment  is 
effected  is  called  a  "  bill  of  exchange."  Between  two  points 
of  the  same  country  this  method  of  transferring  the  equiva- 
lent of  money  is  called  "  domestic  exchange  "  in  America 
and  "  inland  exchange  "  in  Great  Britain.1 

In  the  United  States  the  term  "  domestic  exchange  "  is  not 

'Conant  states  that  "the  term  'bills  of  exchange'  is  still  widely  used 
in  Great  Britain  for  Inland  bills." 

The  terms  "  inland  exchange  "  and  "  foreign  exchange  "  have  a  different 
meaning  from  a  legal  standpoint  under  our  State  laws,  as,  for  example, 
the  Statutes  of  Michigan  define  an  "  inland  bill  of  exchange  "  as  one  which 
on  its  face  purports  to  be  both  drawn  and  payable  within  that  State. 
Any  other  bill  is  considered  a  "  foreign  bill  "  so  long  as  drawn  without  the 
State  whether  in  this  country  or  abroad.  Example:  One  drawn  in  Detroit 
and  payable  in  Grand  Rapids  is  an  "inland  bill;  "  one  drawn  in  Detroit 
and  payable  in  Chicago,  or  drawn  in  Chicago  and  payable  in  Detroit,  or 
in  the  same  manner  between  New  York  and  Paris,  is,  in  each  instance,  a 
"  foreign  bill "  from  this  standpoint. 


152 

commonly  used  to  designate  what  are  strictly  such  trans- 
actions. We  are  more  apt  to  say,  "  New  York  Funds," 
"  Chicago  Funds,"  or  "  check  "  or  "  draft  on  New  York,"  etc. 

A.  K.  Fiske  very  clearly  describes  a  "  bill  of  exchange  "  in 
this  way:  "  The  New  York  exporter,  when  he  sends  a  cargo 
of  wheat  or  cotton  to  England,  draws  a  bill  of  exchange,  which 
is  in  effect  a  draft  payable  to  himself  for  the  amount  due,  upon 
his  consignee  or  upon  a  banker  with  whom  that  consignee  has 
the  necessary  credit  and  upon  whom  the  America  exporter 
is  instructed  to  draw  for  his  payment." 

If  Allen  in  New  York  buys  $1,000  worth  of  wool  of  Wright, 
in  London,  and  the  latter  ships  the  wool  and  writes  an  order 
on  Allen  for  the  $1,000,  this  order  or  "  bill  of  exchange  "  is 
deposited  by  Wright  with  his  London  bankers,  and  is  known 
as  "  New  York  Exchange;  "  that  is,  it  is  good  when  presented 
in  New  York  for  $1,000,  providing,  of  course,  Allen  can  pay 
the  same  when  presented.  Now,  instead  of  actually  sending 
the  order  to  New  York  and  collecting  the  money  for  shipment 
to  Wright,  the  common  procedure  is  as  follows:  Some  other 
London  merchant,  say  Russell,  becomes  indebted  to  a  New 
York  merchant  for  $1,000;  the  former  not  wishing  to  go  to 
the  expense  of  shipping  money  to  New  York,  applies,  we  will 
say  for  simplicity's  sake,  to  the  same  bankers  with  which 
Wright  deposited  his  order  upon  Allen;  they  sell  an  order 
against  their  New  York  agents  for  $1,000,  to  whom,  in  the 
meantime,  the  order  upon  Allen  &  Company  had  been  sent 
for  collection,  the  amount  being  collected  and  held  by  the 
New  York  agents  to  the  credit  of  the  London  bankers.  Rus- 
sell forwards  an  order,  representing  the  "  New  York  Ex- 
change," to  the  merchant  in  that  city  to  whom  he  is  indebted; 
this  merchant  presents  the  order  to  the  New  York  agents  of 
the  London  bankers  and  obtains  payment.  It  will  be  seen, 
therefore,  that  one  debt  is  made  to  offset  another,  and  no 
money,  in  this  case,  has  actually  been  transferred.  This  is 
the  business  of  "  exchange,"  so-called.  The  bankers  buying 
and  selling  the  same  charge  a  reasonable  profit  for  their 
services. 

Such  "  exchange  "  as  above  is  known  as  "  foreign  exchange," 
and  quotations  appear  in  the  newspapers  of  the  United  States 
as  "  Sterling  (or  '  Sterling  exchange  ')  4.87^,"  meaning  that 
"  exchange  "  on  London  could  be  bought  in  this  country  at 
the  rate  of  $4.87^  for  each  "  pound  sterling  "  English  money. 
Or  "  Sterling  at  Berlin  20.44,"  or  "  at  Paris  25.15^,"  which 
indicates  that  London  "  exchange  "  was  selling  at  20.44  marks 
German  money  and  25  francs  15^  centimes  French  money, 
at  those  points  respectively. 

Formerly,  orders  in  the  form  of  a  "  bill  of  exchange  "  were 
used,  but  in  present  practice  the  buyer  of  a  "  bill  of  exchange  " 


MONEY    AND    INVESTMENTS  153 

simply  gets  a  check  on  the  banker's  agent  at  the  foreign  point 
desired. 

In  some  cases,  especially  in  a  settlement  of  debts  between 
North  and  South  American  points,  "  exchange  "  is  not  bought 
directly  upon  the  city  owed,  but  upon  London.  A  New  York 
merchant  pays  a  Brazilian  merchant  by  buying  a  "  bill  of 
exchange  "  on  London,  which  is  acceptable  to  the  merchant 
in  Brazil,  London  being  the  common  financial  centre  for  much 
international  business. 

In  a  similar  way,  there  may  be  a  common  financial  centre 
for  domestic  points.  New  York  is  the  best  example  in  our 
country. 

This  same  business  is  going  on  between  cities  in  the  same 
country,  as,  for  instance,  between  New  York  and  San  Fran- 
cisco. The  expense  of  shipping  money  back  and  forth  between 
such  distant  points  is  considerable,  hence  the  debts  of  the 
merchants  between  the  two  cities  are  adjusted,  as  far  as 
possible,  by  the  buying  and  selling  of  "  exchange,"  the  same 
as  between  two  points  in  different  countries. 

"  Exchange  "  is  at  a  discount  or  premium  according  to 
whether  there  is  too  much  or  too  little  to  supply  the  demand. 
This  establishes  the  "  rate  of  exchange."  The  shipment  of 
gold  from  one  country  to  another  is  the  final  adjustment  of 
this  "  exchange "  business.  When  debts  accruing  in  one 
country  against  merchants  in  another  are  so  great  that  there 
are  not  enough  "  bills  of  exchange,"  then  gold,  the  usual  form 
of  export  money,  is  shipped  to  adjust  the  difference. 

The  price  of  "  exchange  "  may  also  be  affected  by  the  supply 
of  gold  (bullion)  available  for  the  debtor  country  to  ship  in 
case  of  need.  The  likelihood  of  there  being  a  scarcity  of  gold 
would  cause  "  exchange  "  to  go  to  a  greater  premium  than  would 
result  from  a  scarcity  of  actual  exchange,  with  a  good  available 
gold  supply  at  the  debtor  point.  (See  "  International  Move- 
ment of  Gold.")  "  Domestic  exchange "  can  always  be 
figured  in  one  currency,  but  "  foreign  exchange  "  has  to  be 
calculated  in  the  currencies  of  the  two  different  countries. 
In  the  case  of  buying  a  "  bill  "  on  an  international  "  ex- 
change "  point,  as  in  the  South  American  example,  three 
currencies  have  to  be  taken  into  account. 

"  Foreign  exchange  "  is  always  computed  on  gold  as  a  basis; 
viz.,  that  gold  of  equal  weight  and  fineness  is  of  equal  value 
the  world  over.  "  Foreign  exchange  "  is  drawn  in  the  cur- 
rency of  the  country  where  payable,  and  paid  for  in  the 
currency  of  the  country  cf  issue. 

Under  the  subjects  "  Balance  of  Trade  "  and  "  Letter  of 
Credit  "  more  information  may  be  found  bearing  upon  this 
subject.  Refer  also  to  "  Cable  Transfers  "  and  "  Demand 
Bills." 


154  MONEY    AND    INVESTMENTS 

Exchanges.  A  "  clearing-house  "  (which  see)  expression 
indicating  the  amount  of  checks,  drafts,  etc.,  settled  through 
its  medium.  Same  thing  as  "  clearings."  Also  the  English 
equivalent  of  our  "  exchange  "  as  we  use  it  in  foreign  "  ex- 
change," for  example.  They  use  the  plural,  we  the  singular. 

Exchanges  for  Clearing-House.  When  this  appears  in  a 
"  bank  statement  "  "  clearings  "  are  what  is  understood. 

Exchequer  Bill.  In  time  of  sudden  emergency,  when  money 
is  needed  for  a  temporary  purpose,  the  British  Government  is 
authorized  to  issue  negotiable,  interest  bearing,  coupon  bills 
of  credit,  due  in  five  years;  the  interest  being  fixed  each  year 
but  never  to  exceed  5£%  per  annum.  This  is  a  form  of  in- 
debtedness for  short  time  borrowing. 

These  had  their  origin  in  1696,  but  have  been  gradually 
superseded  by  "  Exchequer  Bonds  "  and  "  Treasury  Bills." 

Exchequer  Bonds.  In  England,  very  much  the  same  as 
"  exchequer  bills."  They  have  'a  definite  time  to  run,  how- 
ever, not  exceeding  six  years,  with  interest  at  not  greater 
than  5£%  per  annum;  the  rate  being  fixed  for  the  full  period 
at  the  time  of  issue.  This  is  a  form  of  indebtedness  for  short 
time  borrowing  and  is  not  confined  to  Great  Britain.  There 
they  were  first  introduced  in  1853. 

Ex-Coupon.  Without  interest;  coupon  already  due,  or 
about  to  become  due,  detached. 

Ex  D.     "  Ex-dividend,"  i.  e.  exclusive  of  dividend. 

Ex-Dividend.    See  "  Dividend  Off,"  meaning  the  same. 

Executor  (or  Executrix).  The  person  named  in  a  will  as 
the  one  to  see  that  its  provisions  are  carried  into  effect. 

Exhaust  Price.  (It  is  necessary  to  first  understand  "  Mar- 
gin.") A  fall  in  prices  to  a  point  where  margins  are  wiped 
out  —  exhausted  —  and  when  brokers  may  be  compelled  to 
sell  out  the  securities  for  self-protection,  unless  additional 
margins  are  furnished. 

Ex-Interest.  Without  interest;  coupon  for  interest  just  due 
and  detached. 

This  term  is  particularly  used  in  reference  to  "  registered 
bonds,"  which,  inasmuch  as  the  interest  is  forwarded  to  the 
holder  by  check,  are,  to  a  certain  extent,  treated  more  or  less 
from  the  standpoint  of  shares  of  stock.  When  the  checks  for 
interest  are  sent  out  to  registered  bondholders,  they  go  for- 
ward to  holders  of  record  as  of  a  certain  date.  Any  sale  of 
such  a  bond  upon  or  immediately  after  a  certain  date,  or,  in 
other  words,  the  closing  of  the  books,  would  be  sold  "  ex- 
interest;  "  that  is,  the  interest  check  would  go  to  the  previous 
holder  and  the  purchaser  makes  his  transaction  upon  that 
understanding.  There  is  at  times  a  difference  in  the  quota- 


MONEY    AND    INVESTMENTS  155 

tions  between  the  registered  and  coupon  bonds  of  the  same 
issue,  equal  to  the  amount  of  the  coupon.  A  registered  6% 
bond,  for  example,  on  which  2%  (four  months)  interest  has 
accumulated,  might  be  quoted  at  106,  which  would  be  the 
equivalent  of  the  same  bond  in  coupon  form  selling  at  '104 
"  and  interest."  Registered  bonds  selling  "  ex-interest  "  are 
at  that  time  quoted  about  equally  in  price,  as  104  "  ex- 
interest  "  and  104  "  and  interest  "  are  equal  one  to  the  other. 
A  better  understanding  of  this  may  be  had  from  reading 
"  Registered  Bond  "  and  "  Books  Close." 

Ex-New.  A  stock  so  quoted  does  not  carry  the  privilege  of 
"  rights,"  that  is,  it  is  "  ex-rights."  (See  those  subjects.) 
Expert  Accountant.  See  "  Auditor." 
Export  Point  of  Gold.  See  "  Gold  Export  Point." 
Express  Company  Securities.  Frank  Haigh  Dixon,  professor 
of  economics  at  Dartmouth  College,  in  his  article  "  Publicity 
for  Express  Companies,"  l  says,  in  substance,  that  the  yearly 
receipts  from  this  large  transportation  agency  are  nearly 
$75,000,000.2  There  are  six  large  companies,  and  a  few  of 
lesser  magnitude.  The  four  largest  are  the  Adams,  American, 
United  States,  and  the  Wells-Fargo.  The  first  three  named 
are  organized  under  a  New  York  law,  granting  them  the  right 
to  issue  transferable  shares  representing  beneficial  interests 
in  the  company,  but  every  owner  incurs  all  the  liability  of  a 
partner.  This  is  a  fact  to  be  considered  in  purchasing  they- 
shares.  The  Wells-Fargo  is  a  Colorado  corporation.  Of  the 
lesser  companies,  there  are  the  Southern  Express,  the  Pacific 
Express,  the  National,  and  two  Canadian  companies,  besides 
numerous  others  organized  by  the  railroads  themselves,  such 
as  those  operating  over  the  Denver  and  Rio  Grande,  Great 
Northern,  and  Northern  Pacific  Lines.  Besides  all  the  above, 
there  are,  of  course,  many  local  companies  doing  a  city  or  a 
city  and  suburban  business. 

It  is  understood  that  the  interests  of  the  larger  corporations 
are  so  interwoven  one  with  the  other,  and  that  they  are  all 
on  such  good  terms  with  the  railroads,  that  competition  is 
almost  unheard  of,  and,  as  matters  are  at  present,  it  does  not 
seem  necessary  to  consider  this  factor  in  connection  with  the 
large  companies.  One  point  deserving  of  consideration,  how- 
ever, is  the  very  remote  possibility  of  the  United  States 
Government  starting  what  would  be  termed  a  "  parcels  post." 
The  inauguration  of  such  a  system  would  probably  create  an 
effective  competition  with  the  express  companies.3  The 

1  Atlantic  Monthly,  July,  1905. 

1  The  Wall  Street  Journal  now  sets  this  figure  at  nearly  $10,000,000 
greater. 

3  The  writer  is  of  the  opinion  that  some  competition  with  the  express 


156  MONEY    AND    INVESTMENTS 

dividend  records  have  been  good  and,  on  the  whole,  express 
company  securities  stand  well  in  the  investment  list. 

These  corporations  have  heretofore  effectually  concealed 
much  information  from  the  public,  as  they  have  not  been 
accustomed  to  make  reports  themselves,  nor  have  they  been 
required  so  to  do  by  the  Government,  but  the  recent  enactment 
of  the  Railroad  Rate  Law  classes  express  companies  as  "  com- 
mon carriers,"  and  brings  them  under  the  control  of  the 
Interstate  Commerce  Commission,  and  especially  gives  the 
Commission  the  power  to  demand  annual  reports. 

Express  Money-Orders.  Another  method  of  remitting 
money  by  mail,  and  very  similar  to  the  "  postal  money- 
orders,"  but  differing  in  these  respects: 

Express  money-orders  need  no  written  application;  they 
are  payable  upon  presentation  without  the  necessity  of  a 
duplicate  being  forwarded  by  the  issuing  office;  are  payable 
at  all  offices  of  the  company,  not  at  some  special  office,  as  by 
the  Government  method;  may  pass  from  hand  to  hand  by 
continual  indorsement  (not  being  limited  in  number)  and 
remain  valid  if  not  presented  within  one  year.  Rates  run 
about  as  follows: 

Not  over  $  2.50  3c.  Over  $30.00  to  $40.00  15c. 

Over  $  2.50  to  $  5.00  5c.  Over     40.00  to    50.00  18c. 

Over      5.00  to    10.00  8c.  Over     50.00  to    60.00  20c. 

Over    10.00  to    20.00  lOc.  Over     60.00  to    75.00  25c. 

•  Over    20.00  to    30.00  12c.  Over     75.00  to  100.00  30c. 

For  sums  over  $100,  charges  are  based  upon  above  rates.  Example: 
$300,  3  x  30c.  =  90c.  $350,  3  X  30c.  -f  the  charge  for  $50  =  $1.10. 

Ex  R.     "  Ex-rights,"  i.  e.  exclusive  of  "  rights." 

Ex-Rights.  (First  read  "  Rights.")  The  sale  of  a  stock 
upon  which  the  privilege  attached  to  its  "  rights  "  has  been 
exercised  or  reserved.  In  any  event,  the  purchaser  obtains 
no  privilege  of  that  nature,  and  so  understands  it  when 
making  a  purchase  "  ex-rights." 

EXT.  The  "  ticker  "  abbreviation  for  "  extended  "  or  "  ex- 
tension." 

Extended  Bonds.  A  bond  of  which  the  payment  of  the 
principal  is  put  off  to  some  future  date;  the  issue  not  being 
replaced  by  other  bonds,  but  the  same  ones  being  left  in  the 
hands  of  investors,  the  security  behind  the  bonds  remains  the 

companies  may  result  from  the  hauling  of  freight  and  express  by  street 
railway  companies,  but  that  there  is  a  possibility  that  even  after  such  a 
limited  competition  might  become  established,  the  express  carrying 
privilege  on  the  street  railways  may  be  passed  into  the  control  of  the  larger 
express  companies,  the  same  way  that  they  have  absorbed  it  among  the 
railroads. 


MONEY    AND    INVESTMENTS  157 

same.  In  such  an  event,  it  is  customary  to  attach  sufficient 
new  coupons  to  cover  the  interest  for  the  time  extended,  or 
new  bonds,  coupons  and  all,  may  be  given  in  exchange  for  the 
old.  Most  issues  of  this  nature  are  extended  at  a  lesser  rate 
of  interest  than  borne  by  the  original  ones.  "  Extended 
bonds  "  have  stamped  or  printed  thereon  the  essential  facts  of 
the  extension,  and,  if  there  are  old  coupons  which  can  be  used, 
they  are  stamped  or  printed  so  as  to  show  the  lesser  rate  of 
interest. 

Extended  Insurance.  This  is  an  option  under  a  life  insur- 
ance policy  which  has  "  lapsed  "  (see  "  Lapse  ")  by  which  the 
insured  obtains  insurance  for  the  face  of  the  original  policy 
for  a  specific  length  of  time,  without  the  payment  of  further 
premiums.  Insurance  of  this  kind  is  sometimes  taken  in 
place  of  a  "  cash  surrender  value  "  or  "  paid-up  value." 

Extension  Bonds.  Secured  by  a  first  mortgage1  upon  an 
extension  of  a  railroad  system,  and  usually  guaranteed  by 
the  company  proper.  Besides  being  a  first  mortgage  upon 
the  extension,  such  a  bond  is  often  a  "  second  "  or  "  junior  " 
mortgage  upon  other  property.  In  the  case  of  the  "  Pacific 
Extension  4's  "  of  the  St.  Paul,  Minneapolis  &  Manitoba 
Railway  Company,  the  bonds  are  secured  by  a  first  mortgage 
on  all  the  company's  lines  in  Idaho  and  Washington  and  by 
a  second  mortgage  upon  its  lines  in  Montana. 

Whereas,  this  class  of  investment  is  dependent  somewhat 
upon  the  amount  of  the  issue  in  proportion  to  the  proper  cost 
of  the  extension,  and  the  need  of  such  extension  to  the  larger 
road,  yet  the  standing  of  the  latter  and  the  value  of  its 
guaranty  are  largely  to  be  considered. 

Extension  of  Mortgage.  When  a  mortgage  on  real  estate 
falls  due,  it  may  be  agreeable  to  both  the  borrower  and  the 
lender  to  extend  it.  An  overdue  mortgage  is  perfectly  good 
and  no  signing  of  papers  or  any  legal  act  is  necessary  in  con- 
nection therewith  to  make  the  claim  of  the  holder  of  the 
mortgage  good  if  he  is  willing  to  postpone  payment.  It  is 
very  customary,  however,  to  fill  out,  sign  and  record,  what 
is  known  as  an  "  extension  of  mortgage,"  for  by  so  doing  if 
there  is  an  agreement  for  the  extension  for  a  definite  time,  it 
will  prevent  the  lender  from  demanding  payment  previous 
to  that  time,  and  is,  therefore,  a  protection  to  the  borrower. 

External  Bonds  (or  Loan).  An  issue  of  government  bonds 
sold  abroad,  as  designated  from  money  borrowed  at  home. 

Extra.     See  "  Dividend,  Extra." 

E.  &  0.  E.    These  letters  stand  for  "  errors  and  omissions 

1  "  Extension  bonds  "  may  not  be  secured  by  a  first  mortgage,  but  if  so 
would  certainly  be  an  exception  to  the  rule. 


158  MONEY    AND    INVESTMENTS 

excepted,"  and  often  appear  on  a  statement  of  an  account, 
so  as  to  relieve  the  accountant  from  any  personal  liability 
for  mistakes. 

F 

Face  Value.  The  value  of  a  security,  regardless  of  any 
coupons,  as  appears  in  the  security  itself;  the  principal. 
(See  "  Par  Value.") 

Facilitating  Process.  See  footnote  to  "  International  Move- 
ment of  Gold,"  page  218. 

Factor.  A  "  factor  "  is  ordinarily  a  commission  merchant, 
differing  from  the  common  broker  by  having  in  his  possession 
the  goods  which  he  offers  for  sale,  although  he  may  exhibit 
samples  only.  He  is  usually  compensated  in  the  way  of  a 
commission,  but  sometimes  in  other  ways.  Usually  a  broker 
or  an  ordinary  agent  trades  in  something  not  in  his  possession, 
delivery  to  be  made  either  through  him  or  directly  between 
the  parties  between  whom  he  is  negotiating  after  the  sale  is 
effected.  In  the  event  of  his  advancing  money  on  goods  placed 
in  his  possession  for  selling,  he  has  a  legal  claim  to  that  extent 
upon  the  goods  or  proceeds  after  sale. 

Failure.  Bankruptcy,  insolvency,  or  inability  to  meet  one's 
engagements. 

Falling.     "  Falling  market;  "  prices  declining. 

False  Certification.     Same  as  "  over-certification." 

Fancy  Options.  "  Puts-and-calls  "  and  "  spreads  "  at 
prices  considerably  at  variance  with  current  market  quota- 
tions. 

Fancy  Price.  A  price  too  high  for  the  time;  not  consistent 
with  existing  conditions  or  with  prices  of  similar  or  other 
securities. 

Fancy  Stocks.  High  priced  stocks  which  are  looked  upon  as 
safe  and  desirable  investments  are  what  the  investment 
banker  understands  by  this  term,  but  the  stock  exchange  man 
thinks  of  a  stock  high  in  price  and  the  quotations  of  which 
fluctuate  widely  as  the  result  of  manipulation. 

F.  and  A.  Interest  or  dividends  payable  semi-annually, 
February  and  August. 

Farm  Loans  (or  Mortgages).  Loans  secured  by  mortgages 
on  farm  properties. 

The  fact  that  in  many  sections  of  the  country  the  lands  in 
the  agricultural  districts  are  steadily  rising  in  value  has 
attracted  many  people  towards  them  for  investment  purposes. 
With  the  exception  of  a  few  localities,  especially  in  the  East, 
where  lands  are  either  "  run  out  "  or  of  a  poor  quality,  or 


MONEY    AND    INVESTMENTS  159 

where  prices  have  risen  to  a  point  beyond  the  earning  capacity 
of  the  land,  the  history  of  farm  values,  in  spite  of  the  tre- 
mendously increased  area  under  cultivation,  has  been  one  of 
fairly  steady  advance,  always  excepting,  of  course,  periods  of 
depression. 

This  condition  of  affairs  is  likely  to  continue  in  many  sec- 
tions of  the  country  until  prices  there  reach  a  point  where 
capital  invested  ceases  to  bring  satisfactory  returns. 

It  is  true  that  there  have  been  many  losses  in  farm  mort- 
gages, but  such  losses  may  generally  be  attributed  to  a  desire 
for  excessive  interest  rates,  improper  judgment  of  the  local 
conditions,  dishonest  or  too  greedy  agents  through  whom  the 
business  has  been  accomplished,  who  have  been  willing  to 
recommend  too  large  loans  for  the  sake  of  the  increased  com- 
mission, or  to  the  failure  on  the  part  of  the  one  holding  the 
mortgage,  and  who  has  been  obliged  to  foreclose  the  property, 
to  wait  for  a  favourable  time  to  sell. 

The  question  of  the  agent  suggests,  however,  that  few 
investors  are  so  situated  that  they  can  make  personal  examina- 
tion of  farms  located  at  a  distance,  upon  which  they  may 
have  an  opportunity  to  make  a  loan.  This  necessitates  the 
selection  of  some  one  with  an  unbiased  opinion  in  whom  con- 
fidence may  be  placed,  and  there  is,  perhaps,  no  grade  of 
investments  which  calls  for  a  more  careful  selection  of  those 
with  whom  the  business  is  done,  than  in  the  purchasing  of 
farm  mortgages. 

The  subject  of  farm  mortgages  is  very  deep  and  one  ex- 
tremely difficult  to  cover  with  any  general  rules.  What  ap- 
plies as  a  conservative  selection  of  a  mortgage  on  farm  lands 
in  New  England,  might  not  apply  at  all  in  Kansas.  In  general, 
however,  the  nature  of  the  soil  must  be  considered,  whether 
the  location  obtains  sufficient  moisture  from  natural  causes; 
if  not,  what  the  irrigation  rights  are,  if  any.  If  it  is  a  Western 
farm  and  dependent  upon  irrigation,  the  investor  must  ascer- 
tain whether  or  no  the  farm  has  the  right  to  a  sufficient  amount 
of»  water  at  a  reasonable  price  at  all  times.  There  are  many 
farms  located  at  the  extreme  lower  end  of  irrigating  canals, 
which,  at  times,  may  suffer  from  a  deficiency  of  water  supply 
The  climate,  the  class  of  crops  raised,  quality  and  depth  of 
soil,  the  nearness  to  a  market,  churches  and  schools,  trans- 
portation facilities,  the  sufficiency  of  farm  tools  necessary  to 
properly  carry  on  agriculture  by  modern  methods,  whether 
or  no  such  farming  tools  are  covered  by  a  "  chattel  mort- 
gage," the  record  which  the  farmer  has  made  for  some  years 
back  as  a  producer  and  saver,  the  reason  for  his  needing  the 
money  —  and  this  last  is  a  very  necessary  feature  to  consider, 
for,  if  the  money  is  going  for  betterment  of  the  property  or 
for  partial  payment  thereon,  that  is  one  thing,  if  it  is  to  be  used 


160  MONEY    AND    INVESTMENTS 

for  some  outside  purpose,  it  should  not  be  encouraged.  In 
lack  of  personal  knowledge  of  the  character  of  the  proposed 
mortgagor,  inquiry  should  be  carefully  made  among  his 
neighbours  and  tradesmen,  if  possible.  The  probable  ready 
market  value  of  similar  lands  in  the  same  locality  should  be 
ascertained;  not  their  salable  value  during  boom  times, 
but  during  dull  times  as  well,  and  upon  the  latter  figures  the 
probable  market  value  of  the  farm  ascertained,  and  a  mort- 
gage not  more  than  fifty  to  sixty  per  cent,  of  the  value  made 
thereon,  including,  of  course,  a  fair  valuation  for  the  buildings 
and  improvements.  Although  buildings  may  add  materially 
to  the  value  of  the  farm,  yet  that  is  not  where  the  earning 
capacity  of  the  property  lies.  Therefore,  in  a  security  of  this 
kind,  the  buildings  should  not  be  taken  at  more  than  25% 
of  the  whole  property.  It  is  desirable  that  the  borrower  should 
be  married  and  an  occupant  of  the  property.  Unimproved 
land  is  doubtful  security,  and  loans  upon  it  should  be  made 
not  only  with  great  caution,  but  at  a  very  low  percentage  of  a 
conservative  market  value. 

It  is  supposed  that  the  lender  will  follow  out  carefully  the 
usual  rules  for  making  a  "  mortgage,"  as  described  under  the 
subject  in  quotations. 

What  one  Western  writer  has  said  is  of  interest  here: 

"  The  farmer  uses  money  in  his  business  precisely  as  does 
the  merchant,  and  his  mortgage  is  no  more  to  be  considered  as 
an  evidence  of  lack  of  prosperity  than  the  note  of  the  mer- 
chant, given  in  exchange  for  goods.  The  farmer  in  the  Corn 
Belt  has  been  able  to  make  legitimate  profits  during  the  past 
ten  years  on  account  of  the  steady  rise  in  land  value.  From 
his  income  he  makes  a  partial  payment  on  lands  which  he 
wishes  to  acquire,  and  gives  a  mortgage  to  pay  for  the  balance. 
This  has  been  his  savings  bank  and  it  cannot  be  denied  by 
those  familiar  with  the  conditions  that  it  is  a  good  one.  We 
are  still  an  agricultural  nation  and  land  is  the  foundation  of 
our  national  prosperity.  When  agriculture  prospers,  other 
industries  also  prosper." 

Farm  loans  are  practically  free  from  market  fluctuations, 
and  are  influenced  but  little,  if  any,  by  political  changes, 
added  to  which  they  pay  a  liberal  rate  of  interest. 

Farthing.  The  smallest  English  coin,  being  one-fourth  of 
their  penny,  and  equivalent  to  about  one-half  a  cent  in  United 
States  money. 

Fd.  (or  Fdg.).     Funding. 

Federal.  Federal  Mining  &  Smelting  Co.  (Silver  and 
lead.) 

Fee.    To  "  owe  in  fee  "  is  to  have  absolute  possession  of. 

Feeder.     A  branch,  tributary,  or  smaller  connecting  trans- 


MONEY    AND    INVESTMENTS  161 

portation  company,  which  originates  or  collects,  freight, 
passengers,  etc.,  and  "  feeds "  its  business  into  a  larger 
company.  Branch  lines  of  a  railroad  are  called  its  "  feed- 
ers." 

Fee  Simple.  A  landed  estate  belonging  to  the  owner  and 
his  heirs  and  assigns  for  ever. 

Feverish.  When  prices  are  very  changeable,  up  and  down; 
conditions  unsettled;  worriment  discernible  on  the  faces  of 
those  transacting  the  business;  a  general  uncertainty  as  to 
what  will  happen  next. 

Fiat  Money.  Money  which  a  government  declares  shall  be 
accepted  as  legal  tender  at  its  face  value;  money  issued  by  a 
government  which  is  supposed  to  have  the  power  to  enforce 
its  acceptance,  within  its  own  dominions,  in  payment  of  debts. 
As  generally  understood  "  fiat  money  "  has  no  real  value,  or 
at  least  lesser  value  than  its  face.  In  the  latter  case,  the 
difference  between  the  real  and  face  value  is  "  fiat  money." 

Fiduciary.  "  Fiduciary  institutions:  "  trust  companies, 
banks,  etc.  "  Fiduciary  capacity "  has  relation  to  some 
financial  trust. 

Finance.  To  "  finance  "  an  enterprise  is  to  raise  the  neces- 
sary money  for  its  needs. 

Finance  Bills.  "  Bills  of  exchange  "  (which  must  first  be 
understood)  on  foreign  countries  issued  by  American  bankers 
against  credits  or  loans  granted  them  by  bankers  in  other 
countries,  and  not  against  shipments  of  goods.  The  terms 
on  which  the  credits  are  granted,  and  whether  or  not  it  is 
necessary  to  pledge  bonds,  stocks,  or  other  collateral,  as 
security,  is  a  matter  for  arrangement  between  the  different 
parties. 

Finance  Committee.     See  "  Savings  Bank." 

Finance  Company.  In  the  United  States,  the  "  holding 
company  "  (to  which  refer)  is  commonly  known  as  a  "  finance 
company,"  but  the  meaning  in  England  is  totally  different. 
There  the  term  has  reference  to  companies  dealing  in  corpora- 
tion securities. 

Financial  Bill.  On  the  14th  of  March,  1900,  there  was  ap- 
proved an  Act  of  Congress  to  define  and  fix  the  standard  of 
value,  to  maintain  the  parity  of  all  forms  of  money  issued  or 
coined  by  the  United  States,  to  refund  the  public*  debt,  and 
for  other  purposes,  which  is  commonly  known  as  the  "  Finan- 
cial Bill."  It  is  also  referred  to  as  the  "  Gold  Standard  Act  " 
and  "  Currency  Act."  The  essence  of  this  bill,  in  addition  to 
what  the  reader  will  find  under  "  Gold  Reserve,"  was  to  define 
and  fix  the  standard  of  value  as  follows: 

'  That    the    dollar    consisting   of   twenty-five   and   eight- 


162  MONEY    AND    INVESTMENTS 

tenths  grains  of  gold  nine-tenths  fine,  as  established  by 
section  thirty-five  hundred  and  eleven  of  the  Revised  Statutes 
of  the  United  States,  shall  be  the  standard  unit  of  value,  and 
all  forms  of  money  issued  or  coined  by  the  United  States  shall 
be  maintained  at  a  parity  of  value  with  this  standard,  and  it 
shall  be  the  duty  of  the  Secretary  of  the  Treasury  to  maintain 
such  parity." 

Financial  Year.  Sometimes  used  in  the  place  of  "  fiscal 
year,"  to  which  refer. 

Fine  Bars.  Gold  or  silver  bars  containing  99%  of  pure 
metal  are  generally  so  considered. 

Fine  Gold.  Gold  which  is  free  from  impurities;  pure.  The 
mint  value  in  England  of  an  ounce  of  "  fine  gold  "  is  84s.  11.45d, 
which  equals  our  own  mint  price  of  $20.672. 

Fineness.     See  "  Standard  of  Weight  and  Fineness." 

Fire  Insurance.  Any  explanation  or  definition  covering  the 
subject  of  fire  insurance  is  unnecessary  here,  but  a  few  sug- 
gestions to  those  taking  out  insurance  of  this  class  may  be 
pertinent. 

Familiarize  yourself  with  the  laws  of  the  State  under  which 
you  are  insuring,  so  that  you  may  have  some  reasonable  idea 
as  to  your  rights.  In  New  Hampshire  and  a  few  other  States, 
for  instance,  the  "  valued  policy,"  so  called,  is  in  effect,  which 
amounts  to  this:  that  you  are  entitled  to  collect  the  amount 
of  the  loss  on  buildings  in  event  of  total  destruction  by  fire, 
no  matter  what  amount  of  insurance  is  placed  thereon;  that 
is,  it  is  incumbent  upon  the  company  not  to  insure  buildings 
for  more  than  they  are  worth.  In  most  States  the  insured 
cannot  collect,  in  case  of  loss,  greater  than  the  actual  damage, 
no  matter  how  much  in  excess  of  the  value  of  the  property  the 
insurance  had  been  placed. 

Do  not  keep  your  insurance  policy  in  the  same  building  that 
is  covered  by  such  a  policy. 

In  insuring  furniture  or  personal  property  in  general,  take 
an  accurate  list  of  the  same  with  the  probable  value  of  each 
article,  and  keep  this  list  in  some  place  safe  from  fire.  Some 
persons  are  so  particular  that  all  articles  of  furniture  or 
property  which  would  be  covered  by  a  policy  of  this  kind,  are 
invariably  purchased  accompanied  by  bills  showing  their  cost, 
such  bills  being  properly  filed  away  to  be  produced  in  case  of 
any  dispute  arising  over  the  adjustment  of  a  claim. 

There  are  cases  of  insurance  upon  buildings  where  the  in- 
sured would  not  care  to  include  insurance  upon  the  founda- 
tion; that  is,  in  case  of  destruction  of  the  building,  the 
foundation  might  be  left  intact  or  slightly  damaged,  which 
would  give  the  right  to  the  insurance  company  to  deduct  the 
value  of  the  same  at  the  time  of  adjustment.  The  character 


MONEY    AND    INVESTMENTS  163 

of  the  foundation  may  be  such  that  it  would  be  practically 
impervious  to  fire,  or  the  character  of  the  building  may  be 
such  that  if  once  destroyed  there  would  be  no  desire  to 
rebuild,  and,  therefore,  the  foundation  would  be  of  no  value 
to  the  insured.  In  such  cases,  the  item  of  foundation  may  be 
specifically  omitted  from  the  policy. 

Read  your  policy  and  carefully  carry  out  the  conditions 
enumerated  therein.  Note  date  of  expiration,  for  it  is  con- 
ceivable that  your  agent  may  not  advise  you  when  the  policy 
does  expire,  and,  therefore,  your  property  may  be  unprotected. 
Always  pay  premiums  promptly.  Do  not  try  to  mislead  the 
agent  by  concealing  information  or  misstating  facts.  Be  sure 
that  your  policy  contains  the  clause  that  other  insurance  is 
permitted. 

In  an  insurance  policy  covering  furniture  or  movable  goods, 
if  any  change  in  the  location  of  the  articles  insured  is  to  be 
made,  notification  must  be  sent  to  the  insurance  agent. 

Any  premises  intended  for  occupancy  should  not  be  allowed 
to  remain  vacant  longer  than  provided  for  in  the  policy,  with- 
out obtaining  permission  from  the  agent. 

Ascertain  that  your  policy  contains  a  clause  granting  pro- 
tection in  case  loss  or  damage  results  from  lightning. 

In  case  of  loss,  notify  the  agent  at  once. 

In  case  your  property  is  mortgaged,  the  policy  should  bear 
an  indorsement  somewhat  as  follows: 

"  Payable  in  case  of  loss  to ,  mortgagee,  as  his  in- 
terest may  appear." 

Insurance  for  a  short  period,  such  as  a  year,  is  more  ex- 
pensive in  the  long  run  than  for  some  term  like  three  years. 

Fireworks.  Tremendous  speculation;  rapid  advance  in 
prices. 

Firm.  Strong;  tending  upwards;  not  declining.  The 
stock  market  is  said  to  be  "  firm  "  when  there  is  no  tendency 
towards  a  decline  in  prices;  a  condition  of  stability  existing. 
Money  is  "  firm  "  when  interest  rates  for  loans  are  higher  than 
the  average.  Prices  are  "  firm  "  when  inclined  to  rise,  or  at 
least,  remaining  stationary.  (See  "  Offered  Firm.") 

A  partnership  of  two  or  more  persons  for  the  carrying  on  of 
any  business,  as  distinguished  from  an  incorporated  com- 
pany. An  agreement,  generally  to  exist  for  a  specified  time, 
is  drawn  up  and  signed  by  the  several  partners,  setting  forth 
the  rights  of  each.  This  is  called  a  "  partnership  agreement." 
(See  also  "  Special  Partner.") 

Finn  Bid.     See  "  Offered  Firm." 

First  and  Consolidated  Mortgage.  See  "  First  Consolidated 
Mortgage." 

First  and  General  Mortgage  Bonds.    This  indicates  an  issue 


164  MONEY    AND    INVESTMENTS 

secured  by  a  "  general  mortgage  "  (to  which  refer)  on  all  the 
property  and  by  a  "  first  mortgage  "  on  a  part  of  it. 

First  and  Refunding  Mortgage  Bond.  It  might  be  well  to 
read  the  matter  under  "  First  Refunding  Mortgage  Bond," 
by  an  understanding  of  which  a  "  first  and  refunding  issue  " 
may  be  readily  comprehended.  An  issue  such  as  the  last 
mentioned  should  be  one  which  has  extended  a  genuine  first 
mortgage  upon  the  whole  property  which  it  covers,  but  it 
may  be  such  an  issue  as  described  in  the  case  of  the  Old  Colony 
Street  Railway  bonds  under  the  subject  of  "  First  Refund- 
ing Mortgage  Bond."  The  and  therefore,  inserted  between 
"  first  "  and  "  refunding  "  leaves  a  very  uncertain  meaning 
as  to  what  such  an  issue  really  is,  and  it  is  essential  that  an 
investor  should  ascertain  exactly  the  terms  of  the  mortgage 
itself. 

First  Consolidated  Mortgage.  Read  "  Consolidated  Mort- 
gage Bond."  A  "  first  consolidated  mortgage  "  issue  would 
generally  indicate  what  would  be  literally  understood  by 
such  combination  of  words;  viz.:  a  consolidated  mortgage 
issue  and  the  first  one  of  such  placed  upon  the  property.  But 
a  "  first  and  consolidated  mortgage  "  would  be  quite  a  dif- 
ferent thing.  It  would  indicate  not  only  a  "  consolidated 
mortgage  "  issue  upon  the  property,  but  a  "  first  mortgage  " 
upon  some  parts;  that  is,  upon  such  parts  as  have  not  been 
previously  mortgaged. 

First  General  Mortgage  Bonds.  (Read  "  General  Mortgage 
Bonds.")  This  is  not  only  an  issue  secured  by  a  "  general 
mortgage,"  but  the  first  one  of  that  nature  placed  upon  the 
property. 

First  Lien.  See  "  First  Mortgage,"  meaning  the  same  in 
reference  to  bonds. 

First  Lien  and  General  Mortgage.  This  is  taken  as  an 
example  of  an  issue  of  bonds  bearing,  apparently,  two  names. 
It  is  impossible  to  take  the  amount  of  room  necessary  to 
describe  every  possible  combination  of  names  of  this  kind 
which  may  be  used  in  the  designation  of  a  mortgage.  The 
Norfolk  and  Western  Railway  Co.  has  an  issue  of  4%  bonds 
bearing  the  above  title.  It  is  a  "  first  lien;  "  that  is,  a  "  first 
mortgage,"  on  approximately  200  miles  of  road,  but  upon  1,592 
miles  of  the  railroad  there  are  other  mortgages  which  would 
come  ahead  of  this  particular  mortgage,  and,  therefore,  upon 
that  portion  of  the  road  it  is  a  "  general  mortgage,"  so-called. 
It  will  be  seen  that  the  part  of  the  road  upon  which  the  issue 
is  a  "  first  mortgage  "  is  comparatively  small. 

First  Mortgage.  (Read  "  Mortgage.")  There  are  sometimes 
several  mortgages  placed  upon  the  same  property.  The  one 


MONEY    AND    INVESTMENTS  165 

having  the  prior  claim  to  or  preference  over  the  others  is 
known  as  the  "  first  mortgage."  This  will  be  better  under- 
stood by  reading  the  next  subject  and  also  the  matter  under 
"  Second  Mortgage." 

First  Mortgage  Bond.  A  promise  to  pay  in  the  form  of  a 
bond  and  secured  by  a  first  mortgage.  (See  "  Mortgage.") 
It  has  first  claim  on  the  property  of  the  corporation,  as  well 
as  upon  the  earnings.  A  bond  of  this  kind  is  so  well  under- 
stood, that  little  more  need  be  said  of  it  here.  A  word  of 
warning,  however,  may  be  wise:  do  not  think  that  a  "  first 
mortgage  bond  "  is  always  secured  by  a  first  mortgage  on 
all  the  property  of  the  corporation.  A  company,  at  the  time 
of  the  issuing  of  such  a  bond,  may  be  a  comparatively  small 
affair,  but  later  grow  into  much  prominence  by  the  absorbing 
of  other  properties.  On  most,  and  possibly  all,  of  the  absorbed 
properties  there  may  have  already  been  mortgages  existing, 
and,  therefore,  the  "  first  mortgage  bond  "  of  the  original 
company  may  be  but  one  of  several  such  on  the  combined 
companies,  although  enjoying  the  credit  attached  to  bearing 
the  name  of  the  parent  company. 

One  note  of  caution  may  be  sounded  here;  namely,  not  to 
lay  too  much  stress  upon  the  fact  that  a  bond  is  a  first  mort- 
gage, because  if  it  is  a  first  mortgage  it  does  not  imply  that 
it  is  a  good  mortgage;  in  other  words,  good  security  for  the 
debt.  A  first  mortgage  on  some  property  may  be  far  inferior 
to  a  second  or  third  mortgage  on  another.  The  first  mortgage 
part  merely  indicates  that  it  is  better  secured  than  any  other 
indebtedness  upon  the  same  property. 

First  Mortgage  Trust  Bond.  This  is  a  form  of  a  "  collateral 
trust  bond  "  (to  which  subject  the  reader  is  referred),  and  by 
which  it  will  be  seen  that  under  certain  conditions  a  bond  of 
this  nature  may  be  indirectly  a  first  mortgage.  A  "  first 
mortgage  trust  bond  "  is,  therefore,  one  secured  by  a  deposit 
of  other  bonds  which  are  in  themselves  secured  by  a  first 
mortgage.  An  issue  of  this  nature  is  that  of  the  Louisville 
&  Nashville  Railroad  Co.,  which  is  secured  by  a  deposit  of  the 
first  mortgage  5%  bonds  of  the  Birmingham  Mineral  R.  R. 
Co.,  and  the  first  mortgage  6%  bonds  of  the  Owensboro  & 
Nashville  Ry.  Co. 

First  of  Exchange.     See  "  Set  of  Exchange." 
First  Preference  Shares.     The  English  term  equivalent  to 
our  "  first  preferred  stock." 

First  Preferred  Stock.     See  "  Preferred  Stock." 
First  Refunding  Mortgage  Bond.    Do  not  confuse  this  with 
a  "  refunding  first  mortgage  bond."     Note  that  there  is  quite 
a  difference  whether  the  word  first  qualifies  "  refunding  "  or 


166  MONEY    AND    INVESTMENTS 

"  mortgage."  A  "  refunding  first  mortgage  bond  "  takes  the 
place  of  a  "  first  mortgage  "  issue,  which  has  been  outstanding 
and  which  the  company  desires  to  extend,  not  pay  off.  The 
new  (or  refunding)  issue  is  a  first  mortgage  pure  and  simple, 
as  was  the  original  one.  But  not  necessarily  so  an  issue  in 
which  the  word  first  precedes  "  refunding."  In  this  case,  there 
may  be  no  first  mortgage  securing  it,  but  may  simply  be  the 
first  "  refunding  "  issue  which  the  company  has  put  out,  and, 
in  that  sense,  the  adjective  applies  to  "  refunding  "  only. 
But  usually  the  issue  is  a  first  mortgage  on  a  small  part  of  the 
property,  although  not  upon  the  whole.  An  actual  example 
would  be  the  case  of  the  Old  Colony  Street  Railway  Co.  which 
had  outstanding  April  1,  1905,  $1,777,000  "  first  refunding 
mortgage  bonds,"  so-called,  but  secured  by  a  first  mortgage 
on  a  power  station  and  only  41^  miles  of  track  out  of  a  total 
mileage  of  367;  against  the  balance  other  mortgage  bonds 
amounting  to  $4,667,000  held  prior  claims. 

It  is,  of  course,  contemplated  that  this  "  first  refunding 
mortgage  "  issue  shall,  at  some  future  time,  become  a  first 
mortgage  on  all  the  property,  by  the  retiring  of  the  $4,667,000 
bonds  as  they  become  due,  and  replacing  them  with  an  equal 
amount  of  the  "  first  refunding  mortgage  "  issue. 

Firsts.     First  mortgage  bonds. 

First  Teller.     Another  name  for  a  "  paying  teller." 

First  Trust  Mortgage.  This  is  an  example  of  the  wilful 
misusing  of  the  title  of  a  bond,  and  was  so  used  by  a  banking 
house  to  designate  an  issue,  the  proper  title  to  which  was 
"  First  Mortgage  and  Collateral  Trust."  Evidently  there  was 
a  dislike  to  the  "  collateral  trust  "  idea,  and,  therefore,  "  trust 
mortgage  "  was  used  in  lieu  thereof.  "  Trust  mortgage  "  is 
a  very  vague  wording  and  hardly  proper  under  the  circum- 
stances. 

The  attention  of  the  reader  is  again  called  to  the  necessity 
of  not  only  a  careful  consideration  of  the  exact  and  proper  title 
of  any  security,  but  is  advised  to  possess  himself  of  informa- 
tion giving  the  exact  status  of  such  security  in  relation  to 
other  obligations  of  the  same  company;  and  is  likewise 
strenuously  advised  to  read  with  great  care  all  the  printed 
matter  appearing  upon  the  face  of  a  bond,  or  its  coupons, 
and  to  pursue  a  like  course  in  relation  to  every  security  to  be 
purchased  or  loaned  upon. 

First  United  States  Bank.  It  was  due  to  the  efforts  of 
Alexander  Hamilton,  the  first  Secretary  of  the  Treasury,  that 
a  charter  from  Congress,  in  1791,  was  granted  authorizing  a 
United  States  Bank  for  the  purpose  of  regulating  the  currency, 
taking  public  money  on  deposit  and  acting  as  official  agent  of 
the  government.  The  capital  was  $10,000,000,  one-fifth  of 


MONEY    AND    INVESTMENTS  167 

which  was  held  by  the  Government;  the  balance  by  the  public 
at  home  and  abroad.  The  voting  power,  however,  was  so 
restricted  that  the  foreign  holders,  who  were  really  in  the 
majority,  were  unable  to  exercise  control,  as  they  were  not 
allowed  to  vote  by  proxy.  The  Secretary  of  the  Treasury  had 
the  right  of  inspection;  its  notes  were  made  receivable  for 
public  dues,  provided  they  were  kept  repayable  in  coin.  It 
was  permitted  to  have  branches,  which  were  established  in 
most  of  the  important  cities,  the  main  office  being  in  Phila- 
delphia. It  was  a  very  successful  institution.  Its  charter 
was  for  but  twenty  years,  a  question  of  its  constitutionality 
had  been  raised,  and  the  subject  of  its  renewal  aroused  political 
opposition.  The  renewal  was  defeated  and  the  bank  liqui- 
dated, each  $400  share  returning  to  its  holder  $434.  At  one 
time,  it  had  deposits  of  about  $8,500,000  and  circulation  of 
about  $4,500,000. 

Fiscal  Year.  Any  yearly  period,  regardless  of  the  calendar 
year,  at  the  end  of  which  any  firm,  corporation,  or  munici- 
pality may  close  its  books  in  order  to  determine  its  financial 
condition. 

Fish  Scales.     See  "  Five-Cent  Silver  Piece." 

Fitchburg.  Fitchburg  R.  R.  Co.,  leased  to  the  Boston  & 
Maine  R.  R.  Co. 

Five-Cent  Silver  Piece.  A  small  coin  of  the  United  States, 
the  minting  of  which  was  discontinued  by  Act  of  February 
12,  1873.  Legal  tender  in  amounts  not  exceeding  $10.  This 
coin  is  called  the  "  half-dime,"  and  in  some  sections  of  the 
country  they  have  been  nicknamed  "  fish  scales." 

Silver  half-dimes  were  the  first  coins  turned  out  by  the 
United  States  Mint  —  October,  1792. 

Five  Per  Cent.  Redemption  Fund.  Every  national  bank  is 
required  by  law  to  keep  on  deposit,  at  all  times,  in  the  Treas- 
ury of  the  United  States,  in  lawful  money  of  the  United  States, 
a  sum  equal  to  five  per  cent,  of  the  bank's  circulation  (see 
"  National  Bank  Notes  "),  to  be  held  and  used  for  the  re- 
demption of  such  circulation,  which  sum  shall  be  counted  as 
a  part  of  the  bank's  lawful  reserve.  There  are  further  pro- 
visions as  to  the  canceling  of  national  bank  notes  when  pre- 
sented for  payment;  notifying  the  banks  as  to  the  depletion 
of  the  fund  on  account  thereof  and  other  necessary  require- 
ments. 

This  fund  provides  for  the  immediate  redemption  of  the 
notes  of  a  failed  bank,  but  when  so  depleted  must  be  repaid 
out  of  the  assets  of  the  bank  when  realized  upon. 

Five  Ports.  New  York,  Boston,  Philadelphia,  Baltimore 
and  New  Orleans. 


168  MONEY    AND    INVESTMENTS 

Five  Twenties.  Bonds  due  in  twenty  years,  but  subject  to 
redemption  after  five  years  from  date  of  issue,  at  the  pleasure 
of  the  issuer. 

Fixed.  Established;  settled;  unchanged.  "  Fixed  earn- 
ings; "  earnings  which  have  continued  for  a  sufficiently  long 
time  to  warrant  the  belief  that  they  will  remain  permanent. 

Fixed  Charges.  The  "  fixed  charges  "  of  a  corporation  are 
generally  conceded  to  be  the  interest  upon  its  bonds  and 
floating  debt,  sinking  fund,  if  any  —  although  the  latter  may 
be  shown  under  a  separate  heading  —  rentals,  taxes,  and  in- 
surance. (Railroad  companies  include  insurance  under 
"  General  expenses.") 

Sometimes  these  three  latter  items  are  given  under  a  sepa- 
rate heading  and  not  included  in  "  fixed  charges,"  but  unless 
they  are  included  in  the  operating  expenses  of  the  company, 
they  should  be  included  in  the  "  fixed  charges." 

Some  very  prominent  "  accountants  "  call  "  fixed  charges:  " 
"  bond  interest,  taxes,  and  rentals,"  but  there  seems  no  rea- 
son why  "  sinking  fund  "  and  fire  insurance,  on  permanent 
property  at  least,  should  not  also  be  included.  Many  circular 
descriptions  of  bond  and  stock  issues  recognize  "  bond 
interest  "  only  as  "  fixed  charges,"  but  this  is  more  or  less 
deceptive. 

There  is  good  authority  for  believing  that  in  good  times  the 
"  fixed  charges  "  of  a  corporation  should  not  exceed  much,  if 
any,  50%  of  the  net  earnings;  this  in  order  to  provide  for  the 
decreased  earnings  of  bad  times. 

Flat.     Without  interest.     (See  "  Accrued  Interest.") 

Flaxseed.  This  is  dealt  in  upon  the  Chicago  Board  of  Trade 
the  samfe  as  grain  and  other  commodities.  The  common 
trading  unit  is  1,000  bushels.  The  rate  of  commission  charged 
for  the  purchase  or  sale  or  for  the  purchase  and  sale  in  1,000 
or  5,000  bushel  lots,  or  multiples  thereof,  is  \  of  a  cent  per 
bushel.  The  usual  "  margin  "  required  is  10  cents  per  bushel. 

Fleece.  This  expression  arises  from  the  use  of  the  word 
"  lamb."  To  "  fleece  "  one,  means  to  take  advantage  of  his 
ignorance,  resulting  in  his  financial  loss  and  the  gain  of  the 
one  doing  the  "  fleecing."  When  a  lot  of  unsuspicious  in- 
vestors, or,  more  properly  speaking,  speculators,  rush  into  the 
market  and  buy  a  certain  stock  at  high  prices,  and  after- 
wards find  that  large  stockholders  in  that  corporation,  well 
posted  upon  its  financial  condition,  had  sold  the  stock  at 
what  they  knew  to  be  very  high  prices  and  far  above  its 
actual  worth,  these  speculators  are  said  to  have  been 
"  fleeced,"  although,  probably,  no  actually  unlawful  act 
had  been  done  by  the  ones  selling  out.  The  losers  by  such 


MONEY    AND    INVESTMENTS  169 

a  transaction  as  this  are  called  "  lambs."  A  lamb  is  a  symbol 
of  innocence,  an.d  the  unwary  one  caught  napping  is  such. 

Flier.  A  purchase  or  sale  by  a  speculator  with  the  ex- 
pectation of  an  early  profit;  something  bought  with  the 
gambler's  spirit,  with  an  understanding  that  the  chance  for 
profit  is  very  speculative. 

Float.  To  "  float  "  a  company  means  to  sell  its  stock  or 
securities;  thus  raising  needed  money  for  capital,  etc. 

Floating  Debt.  All  notes  or  forms  of  indebtedness  calling 
for  payment  within  a  comparatively  short  time,  as  distin- 
guished from  bonds  or  other  fixed  forms  of  indebtedness. 

Floating  Stock  (or  other  Securities).  Available  for  purchase 
or  speculation.  This  designates  such  from  that  which  is 
locked  up  in  the  hands  of  investors,  and  so  not  offered  upon 
the  market. 

Floor.  The  "  floor  "  of  an  exchange;  the  place  where  the 
trading  is  done. 

Floor  Broker.    Same  thing  as  a  "  two-dollar  man." 

Floor  Traders.  Those  upon  the  floor  of  the  stock  exchange 
who  buy  and  sell  securities  for  their  own  account,  being 
members,  of  course,  of  the  exchange.  They  are  sometimes 
called  "  room  traders." 

Florin.  The  monetary  unit  of  the  Netherlands,  equal  to 
$.402  United  States  money.  (See  also  "  Guilder.") 

Also  a  silver  coin  of  Great  Britain,  equal  in  value  to  two 
English  shillings  and  about  $.486  United  States  money. 

Flower  Stocks.  Stocks  of  the  Brooklyn  Rapid  Transit  Co., 
People's  Light  &  Coke  Gas  Co.  of  Chicago,  etc.,  and  other 
corporations  in  which  the  banking  house  of  Flower  &  Co.  of 
New  York  has  an  influencing  interest. 

Fit.     Flat;  without  interest. 

Fluctuations.  A  rising  and  falling  in  prices.  "  Fluctua- 
tions were  narrow;  "  this  indicates  that  the  changes  in  prices 
by  advancing  or  declining  were  very  slight. 

Flurry.  An  incipient  panic;  excitement;  alarm;  the  finan- 
cial sky  suddenly  overcast;  securities  falling  quickly  in  price 
and  money  rates  advancing.  Such  an  occurrence,  when  of 
short  duration,  and  producing  no  lasting  effect  on  the  finan- 
cial world;  the  cause  for  alarm  suddenly  removed,  and  con- 
ditions soon  restored  to  approximately  what  they  were 
previous  to  the  excitement,  is  a  "  flurry,"  but  if  the  down- 
ward tendency  should  not  be  allayed,  and  matters  should  go 
from  bad  to  worse,  a  "  panic  "  might  result. 

F.   M.   A.   N.     February,    May,    August,  and    November; 


170  MONEY    AND    INVESTMENTS 

interest    or    dividends    payable    quarterly     beginning    with 
February. 

F.O.B.  These  letters  stand  for"  free  on  board."  "F.O.B. 
Detroit,"  meaning  that  the  shipper  in  Detroit  will  make  no 
extra  charge  for  delivering  the  goods  on  to  the  vessel  or  car. 

For  a  Turn.  A  speculative  phrase;  a  quick  transaction  for 
small  gain  (or  loss). 

Forced  Circulation.  Money  which  is  not  worth  its  face 
value,  and  which  is  by  law  forced  into  use  and  made  accept- 
able —  "  legal  tender  "  —  in  payment  of  debts.  (See  "  Legal 
Tender.") 

Forced  Liquidation.  A  stock  exchange  phrase  meaning  that 
the  owners  of  stock  are  obliged  to  convert  the  same  into  cash 
in  order  to  obtain  necessary  funds. 

Forced  Sale.  A  sale  of  a  debtor's  property  which  the 
creditor  compels.  A  sale  of  this  kind  often  brings  a  lesser 
price  than  the  owner  might  realize  by  a  more  delayed  method. 
The  amount  which  property  brings  at  such  a  sale  is  called  its 
"  forced  sale  value."  The  sale  of  mortgaged  property  to 
effect  foreclosure  to  protect  the  debt  which  it  secures  is  a 
"  forced  sale." 

Forcing.  An  attempt  to  obtain  an  unnatural  level  of  prices 
by  artificial  means. 

Foreclosure.  A  method  of  enforcing  payment  of  a  debt 
secured  by  mortgage  by  taking  and  selling  the  property  which 
it  covers.  This  is  done  when  the  "  mortgagor  "  has  failed  to 
pay  the  interest  or  principal  of  the  debt  which  the  mortgage 
secures,  or  to  perform  some  other  condition  set  out  in  the 
instrument.  In  most  States,  the  property  is  sold  under  a 
power  to  sell  contained  in  the  mortgage  itself,  but  in  some 
States,  where  this  is  prohibited,  an  order  to  sell  must  be 
obtained  from  the  court.  The  proceeds  are  applied  to  the 
indebtedness  secured  by  the  mortgage,  other  liens,  and 
"  foreclosure  "  expenses.  Any  balance  must  be  returned  to 
the  property  owner  —  the  "  mortgagor." 

Foreclosure  Value.  In  buying  bonds  of  any  corporation 
one  of  the  things  always  to  be  considered  is  what  the  value  of 
the  property  would  be  in  case  the  bonds  should  not  be  paid, 
and  the  holders  should  have  to  "  foreclose  "  and  take  pos- 
session of  the  property.  Of  course,  this  same  fact  is  to  be 
considered  in  regard  to  a  mortgage  of  any  kind.  The  value 
of  such  property,  or  the  probable  price  at  which  it  can  be 
sold,  is  called  its  "  foreclosure  value."  If  the  mortgage  on 
a  property  is  $100,000,  and  the  holders  are  obliged  to  "  fore- 
close," and  should  afterwards  sell  the  property  for  $50,000, 


MONEY    AND    INVESTMENTS  171 

the  "  foreclosure  value  "  would  be  the  last  mentioned  sum, 
representing  a  loss  to  the  holders  of  half  their  investment. 

Foreign  Bill.  In  general  this  refers  to  "  foreign  exchange," 
as  explained  under  "  Exchange;  "  but  legally  in  this  country, 
a  "  foreign  bill  "  is  any  "  bill  of  exchange  "  drawn  outside  of 
the  State  in  which  it  is  made  payable.  For  example:  One 
drawn  in  San  Francisco  and  payable  in  Sacramento  is  an 
"  inland  bill,"  but  one  drawn  in  San  Francisco  and  payable 
in  Salt  Lake  City,  or  drawn  in  Salt  Lake  City  and  payable 
in  San  Francisco,  is,  in  each  instance,  a  "  foreign  bill  "  from 
this  standpoint. 

Foreign  Collections.  A  bank  terms  its  "  foreign  collections  " 
its  checks,  etc.,  which  are  not  payable  in  the  city  in  which  it 
is  located. 

Foreign  Department  Boston  Clearing-House  Association. 
Assuming  that  the  reader  has  an  understanding  of  the  general 
workings  of  the  "  clearing-house  "  (to  which  refer)  plan,  the 
subject  heading  here  may  be  explained  as  follows: 

"  Foreign  "  in  "  clearing-house  "  language  means,  "  out  of 
town."  That  is  to  say,  "  foreign  "  checks  are  checks  drawn 
upon  out-of-town  banking  institutions,  not  members  of  a 
given  "  clearing-house." 

The  Boston  Clearing-House  has  devised  a  plan  by  which 
its  members  can,  through  the  agency  of  the  "  clearing-house," 
collect  out-of-town  checks,  etc.,  on  New  England  points, 
and  not  drawn  on  their  own  correspondents.  These  would 
naturally  be  collected  directly  from  the  correspondent. 

The  checks  are  sorted  out  by  each  Boston  bank  in  such  a 
way  that  there  will  be  a  package  for  each  out-of-town  bank, 
a  list  of  the  checks  in  each  package  being  attached  to  the 
same.  These  packages  are  sorted  by  States,  and  then  the 
towns  in  each  State  are  sorted  alphabetically,  and  taken, 
during  the  first  half  of  the  afternoon  of  each  clearing  day,  to 
the  "  clearing-house,"  where  they  are  placed  upon  certain 
desks,  at  which  are  twrenty  clerks  who  in  turn  sort  out  the 
packages  by  banks,  by  which  method  those  on  each  New 
England  bank  are  brought  together.  The  packages  which  are 
to  be  presented  to  a  given  bank  are  listed  upon  a  letter  which 
accompanies  the  package.  As  there  are  622  out-of-town 
banks  in  New  England,  to  which  collections  are  sent,  the 
packages  averaged  for  the  year  ending  March  31,  1906, 
6,070  daily. 

The  out-of-town  banks  settle  with  the  clearing-house 
manager  and  he,  in  turn,  makes  a  settlement  with  each  mem- 
ber of  the  association. 

To  quote  Mr.  James  C.  Hallock: 


172  MONEY    AND    INVESTMENTS 

"  To  clear  his  debits  and  credits,  the  clearing-house  acts  as 
a  member  of  itself,  having  a  desk  and  number  like  any  mem- 
ber. The  banks  charge  it  with  the  out-of-town  checks  left 
for  collection,  and  it  charges  them  with  the  checks  drawn  on 
them  and  remitted  to  the  manager,  also  with  the  New  York 
exchange  and  currency.  The  one  side  balances  the  other, 
upon  proper  adjustments  for  errors,  omissions,  and  delayed 
remittances. 

"  The  settlement  is  through  the  regular  morning  clearing 
on  the  second  business  day  after  the  checks  to  be  collected 
are  delivered  at  the  clearing-house  and  mailed  to  the  country 
banks. 

"  To  keep  the  accounts  straight,  check  tickets  are  used. 
The  manager  checks  the  amount  of  each  package  by  the  foot- 
ing on  the  stub  he  retains  of  the  slip  which  accompanied  it. 
He  checks  the  amount  of  each  letter  by  the  footing  on  its 
stub  which  he  retains.  He  checks  his  receipt  for  collections 
by  the  credit  ticket  each  bank  presents,  giving  the  whole 
amount  of  checks  it  claims  to  have  delivered,  and  the  amount 
on  each  State.  Thus  extraordinary  accuracy  is  attained  with 
ease." 

The  total  clearings  in  the  foreign  department  for  the  year 
ending  March  31,  1906,  were  $618,335,000. 

Foreign  Exchange.     See  "  Exchange." 

Foreign  Exchange  Finance  Bills.     See  "  Finance  Bills." 

Foreign  Loans.     Explained  under  "  Sterling  Loan." 

Foreign  Rails.  The  English  term  for  all  foreign  railroad 
securities,  although  the  London  stock  broker  is  usually  a 
little  more  explicit,  using  the  term  "  Cuban  Rails  "  for  rail- 
road securities  of  Cuba;  "  American  Rails  "  for  our  own; 
and  so  on. 

Foreign  Traveler's  Letter  of  Credit.    See  "  Letter  of  Credit." 

Forfeit.  A  deposit  made,  for  instance,  by  John  Smith  to 
insure  his  fulfilling  his  part  of  a  contract  entered  into  with 
Charles  Jones;  this  deposit  to  become  the  property  of  Jones 
in  case  of  Smith's  failing  to  carry  out  his  agreement.  (See 
also  "  Sealed  Bid.") 

Forged  Bonds.  Recently  (during  the  winter  of  1905-1906) 
there  has  been  a  considerable  agitation  on  the  subject  of  forged 
municipal  bonds,  and  numerous  instances  have  occurred  caus- 
ing serious  loss  and  inconvenience.  There  are  several  ways  in 
which  this  sort  of  forgery  can  be  accomplished.  As  a  munic- 
ipal bond  is  not  customarily  executed  upon  protective  paper, 
such  as  must  be  used  for  securities  to  be  listed  upon  most  stock 
exchanges,  many  being  lithographed  and  perhaps  only  printed, 
any  ordinary  printing  establishment  being  employed  for  the 


MONEY    AND    INVESTMENTS  173 

purpose,  there  is  very  little  standing  in  the  way  of  the  repro- 
duction of  the  actual  form  of  the  bond  itself,  the  signature  of 
the  coupon  being  almost  invariably  a  facsimile  of  that  of  the 
official  required  to  sign  the  same,  and  not  a  pen  and  ink  sig- 
nature. Again,  a  good  many  smaller  municipalities  may 
leave  the  furnishing  of  the  form  of  bond  entirely  to  the  banker, 
who  may,  with  ease,  have  more  bonds  printed  than  required. 
Now,  as  to  the  attaching  of  the  signature  and  seal.  The  latter 
is  of  no  great  difficulty,  as  a  reproduction  of  the  seal  can 
most  generally  be  made  without  much  trouble.  The  signa- 
ture, or  several  such,  upon  the  face  of  the  bond  may  be  easily 
accomplished,  as  there  is  not  great  need  of  a  careful  imitation 
of  the  genuine.  Bonds  are  not  like  a  check,  and  the  signa- 
tures ordinarily  do  not  have  to  pass  the  scrutiny  of  some  one 
familiar  with  the  handwriting  of  the  proper  signers. 

It  will  be  seen  that  all  the  above  is  easily  within  the  ability 
of  a  fairly  clever  dishonest  person.  When  the  first  coupons 
mature,  however,  if  collected  through  some  other  source  than 
the  party  who  forged  them,  the  forgery  will  be  detected;  but, 
in  the  meantime,  dishonest  ends  may  have  been  accomplished. 

There  is  one  way  which  the  purchaser  of  a  municipal  bond 
may  reasonably  satisfy  himself  as  to  the  genuineness  of  the 
signatures.  When  the  bonds  are  taken  up  and  paid  for  by  the 
banking  house  originally  purchasing  them,  they  should  be 
accompanied  by  a  paper,  known  as  a  "  signature  certificate," 
upon  which  should  be  the  pen  and  ink  signatures  of  each 
official  required  to  sign  the  bonds,  which  signatures  should  be 
attested  as  genuine  before  some  bank  official  in  the  city  or 
town  from  whence  the  bonds  emanated  or  by  a  notary  public 
located  therein.  This  "  signature  certificate,"  when  care- 
fully compared  with  the  signatures  upon  the  bonds,  will  prove 
pretty  conclusively  as  to  whether  or  no  they  are  spurious. 
Bonds  which  have  been  outstanding  for  some  years,  and 
upon  which  it  is  reasonable  to  suppose  that  the  coupons  have 
been  collected  from  time  to  time,  would  hardly  require  the 
taking  of  such  precautions  as  above  suggested,  as  it  would  be 
a  reasonable  certainty  that  forgery  would  have  been  long 
before  detected.  This  all,  therefore,  applies  to  bonds  of  com- 
paratively recent  issue,  or  what  may  be  termed  "  new  issues." 

The  proper  remedy  for  all  this  is  for  the  several  States  to 
enact  laws,  as  has  already  to  a  limited  extent  been  done  in  at 
least  one  of  our  States,  which  should  provide  for  the  examina- 
tion of  each  issue  as  to  its  legal  status  by  the  attorney-general, 
or  some  proper  authority,  and  thereafter  should  bear  a  cer- 
tificate to  the  effect  that  each  bond  had  been  so  approved. 
Or,  at  least,  laws  should  be  passed  whereby  each  bond  issued 
by  a  municipality  in  any  given  State  should  be  examined 
and  found  genuine  by  the  proper  State  official  and  attested 


174  MONEY    AND    INVESTMENTS 

to  that  effect  and  sealed  accordingly.  Whereas,  such  bonds, 
perhaps,  would  not  be  entirely  beyond  forgery,  it  would  make 
such  an  act  difficult.  This  having  them  countersigned,  as  it 
were,  is  worth  attention,  as  it  brings  into  play  the  same  pre- 
caution as  taken  by  many  banks  and  corporations  in  counter- 
signing all  checks. 

The  question  may  be  raised:  Why  does  not  the  same  ar- 
gument apply  to  corporation  bonds?  It  will  be  observed 
that  corporation  bonds  bear  a  certificate  of  the  trustee,  which 
is  a  safeguard  somewhat  similar  to  that  suggested  above. 
The  purchaser  of  bonds  of  any  kind  should  examine  them 
very  carefully  to  see  that  all  signatures  are  attached,  or  seals 
placed  thereon,  if  any  are  required,  and  that  any  certificates, 
such  as  a  trustee's  certificate,  are  signed.  It  is  not  uncommon 
to  "find  that  some  bonds  have  passed  through  the  hands  of  the 
most  careful  bankers  with  some  of  the  above  essentials 
omitted. 

For  Money.  For  cash.  This  will  be  understood  by  re- 
ferring to  "  Consols  for  Money." 

For  the  Account.  An  English  term  indicating  a  purchase 
of  securities  for  delivery  on  an  "  account-day,"  as  the  "  fort- 
nightly settling-days,"  to  which  refer.  A  security  bought  for 
immediate  delivery  is  known  as  "  for  money." 

For  the  Opening.  The  sale  of  a  stock  for  delivery  after  the 
opening  of  a  company's  transfer  books.  (See  "  Books  Close.") 
This  must  not  be  confused  with  "  at  the  opening,"  which 
is  explained  under  that  heading. 

Fortnightly  Settlement.    See  "  Fortnightly  Settling-Days." 

Fortnightly  Settling-Days.  The  four  days  in  London  ("  ac- 
count-days "),  occurring  approximately  every  two  weeks, 
upon  which  securities  contracted  for  sale  during  the  pre- 
ceding fortnight  are  delivered  and  paid  for,  as  well  as  all 
differences  settled.  These  days  are  set  by  the  London  Stock 
Exchange  Committee  some  time  ahead  and  so  arranged  as  not 
to  cover  a  Saturday,  Sunday,  or  a  holiday.  The  term  "  fort- 
nightly settlement,"  as  commonly  used  in  London,  is  some- 
what misleading,  as  that  city  "  settles  "  twenty-four  times  a 
year,  or  twice  a  month.  "  Fortnightly  settlements  "  would 
strictly  call  for  twenty-six  settlements.  Twenty-eight  days, 
therefore,  must  be  distributed  over  the  twenty-four  settle- 
ments. This  is  accomplished  by  allotting  nineteen-day  ac- 
counts, and  once  in  a  while  a  twenty-day  account  occurs. 

Although  there  are  really  four  days  in  the  settlement, 
by  general  custom  the  last  day  is  referred  to  as  the  third  day, 
and  so  backward  in  reverse  order,  so  that  really  the  first  day  of 
the  settlement  is  not  called  the  first  day  at  all.  This  may  be 


MONEY    AND    INVESTMENTS  175 

explained  from  the  fact  that  the  first  day  is  really  "  carry-over 
(or  '  contango  ')  day  "  in  mines,  and  the  second  "  carry-over 
day  "  for  the  rest  of  the  market.  The  settlement  was  originally 
of  three  days,  when  the  first  day  was  "  carry-over  day  "  for 
everything.  After  the  settlement  was  changed  to  four  days, 
by  preceding  it  with  another  "  carry-over  day  "  for  mines, 
the  "  carry-over  day  "  for  the  rest  of  the  market  was  still 
referred  to  as  the  first  day.  The  two  "  carry-over  days  "  are 
followed  by  what  is  known  as"  ticket-day,"  and  the  last  day 
of  the  settlement  is  "  pay-day."  (These  subjects  will  be  found 
explained  under  their  separate  headings.)  Should  the  days 
be  so  set  that  the  "  contango  day  "  for  mining  securities 
would,  in  the  ordinary  course,  fall  on  a  Saturday,  "  mining 
contango  day  "  would  be  the  last  preceding  business  day. 

Forward  Movement.    An  advance  in  prices. 

Founder's  Shares.  Much  the  same  as  "  promoter's  shares," 
but  as  this  is  more  particularly  an  English  term,  and  they  are 
now  seldom,  if  ever,  issued,  no  more  space  need  be  given  the 
subject. 

Fourpence,  Fourpenny  Piece,  or  Fourpenny  Bit.  A  silver 
coin  of  Great  Britain,  equal  in  value  to  about  8  cents  United 
States  money.  Also  called  "  groat  "  and  "  joe." 

Four  Ports.  New  York,  Boston,  Philadelphia,  and  Balti- 
more. 

Fractional  Currency.  Money  of  lesser  denominations  than 
$1.  Coins  are  all  we  now  have  in  general  use  of  this  kind  of 
money,  but  not  so  formerly,  as  is  explained  under  "  Sus- 
pension of  Specie  Payment." 

Fractional  Lots.  The  usual  units  for  transactions  upon  the 
stock  exchanges  are  based  upon  100  shares  of  stock  or  $10,000, 
par  value,  in  bonds.  Transactions  for  lesser  amounts  are 
known  as  "  fractional  lots,"  or  "  odd  lots."  On  many  ex- 
changes lesser  amounts,  say  50  shares  of  stock  or  $5,000,  par 
value,  in  bonds,  are  the  units. 

Franc.  The  unit  of  money  of  the  "  Latin  Union  "  —  France, 
Switzerland,  etc.,  —  as  the  dollar  is  for  the  United  States 
and  Canada,  and  equal  to  $.193  United  States  money. 

In  quotations  of  foreign  exchange  "  francs "  indicate 
exchange  on  Paris. 

France,  Government  Bonds  of.    See  "  Rentes." 

France,  Offering  American  Securities  for  Sale.  The  Daily 
Consular  Report  of  June  8,  1907,  gives  the  following  extract 
from  the  law  of  Jan.  30,  1907,  which  is  of  interest  to  those 
contemplating  offering  American  securities  in  France: 

"  Prior  to  all  measures  of  publicity  the  parties  issuing,  ex- 
hibiting, introducing,  or  offering  for  sale  such  securities  shall 


176  MONEY    AND    INVESTMENTS 

cause  to  be  inserted  and  published  in  a  bulletin  supplement 
to  the  Journal  Officiel,  the  form  of  which  will  be  determined 
by  decree,  a  notice  containing  the  following  announcements: 

"  First,  the  denomination  or  title  of  the  society  (or  com- 
pany). Second,  citation  of  the  legislation  (French  or  foreign) 
under  which  the  corporation  is  organized.  Third,  the  location 
of  its  central  office.  Fourth,  the  object  of  the  enterprise. 
Fifth,  the  period  of  time  for  which  the  company  is  authorized. 
Sixth,  the  amount  of  its  capital,  and  the  amount  assessed  and 
paid  or  remaining  to  be  paid  in,  on  each  class  of  securities. 
Seventh,  the  last  balance  sheet,  duly  certified  as  being  a  true 
copy,  or  a  statement  to  the  fact  that  one  has  not  yet  been 
issued. 

"  There  shall  be  also  indicated  the  amount  of  obligations 
which  have  been  already  issued  by  the  company,  with  enu- 
meration of  the  guarantees  which  are  attached  thereto. 

"  There  must  be  furthermore  stated  the  stipulated  benefits 
which  accrue  to  the  profit  of  the  organizers,  administrators, 
and  managers  of  the  company. 

"  The  issuers,  exhibitors,  introducers,  and  those  who  offer 
for  sale  such  securities  shall  be  domiciled  in  France;  they  shall 
be  required  to  sign  the  above  specified  notice  with  their  name 
and  address." 

Franchise.  A  particular  privilege  granted  generally  to  an 
incorporated  body.  It  is  necessary,  for  instance,  for  a  street 
railway  company  to  obtain  a  "franchise;  "  that  is,  a  privilege  to 
operate  and  do  business,  before  constructing  its  road.  A 
franchise  may  be  perpetual;  that  is,  granted  for  all  time,  but 
very  frequently  it  is  limited  in  its  duration. 

Great  care  should  always  be  taken  by  a  purchaser  of  a  bond 
to  be  sure  that  the  franchise  covering  the  property  bonded 
does  not  expire  before  the  date  of  the  maturity  of  the  bond. 
In  buying  stock  in  a  corporation,  which,  for  all  practical 
purposes,  has  no  date  of  maturity,  the  length  of  the  franchise 
should  be  taken  into  consideration,  for  if  at  its  expiration  it 
cannot  be  renewed,  or  renewal  obtained  only  under  arduous 
conditions  imposed  upon  the  corporation,  it  might  not  be 
desirable  to  be  among  its  stockholders.  The  value  of  a  ter- 
minable "  franchise  "  is  questionable.  In  these  days  of  the 
agitation  for  "  municipal  ownership  "  this  franchise  question 
is  a  very  serious  one,  and  time  should  be  allowed  to  investi- 
gate thoroughly,  and  the  future  read  with  all  the  care  possible. 

Franc  Loan.  An  issue  of  bonds,  or  similar  securities,  the 
principal  and  interest  of  which  are  payable  in  "  francs,"  i.e. 
French  money. 

Francs.    See  "  Franc." 

Franklin.    Franklin  Mining  Co.    (Copper.) 


MONEY    AND    INVESTMENTS  177 

Fraternal  Insurance.  See  "  Assessment  and  Fraternal  In- 
surance." 

Free  Credit.    See  "  Open  Account." 

Free  Silver.  This  term  as  commonly  understood  in  reference 
to  the  coinage  question,  means  the  right  on  the  part  of  any 
person  to  deposit  "  standard  silver  bullion  "  at  any  of  the 
United  States  mints  in  any  amount,  and  have  the  same  coined 
at  the  Government's  expense;  the  depositor  receiving  in 
return  for  his  bullion  silver  coins  containing  in  total  the  same 
weight  of  fine  silver  as  brought  by  the  depositor. 

Free  Tontine  Insurance.    See  "  Tontine  Insurance." 

Freight  Density.  The  same  as  ton  miles  per  mile  of  line. 
It  measures  the  general  volume  or  density  of  business 
done. 

To  find  the  "  freight  density,"  as  it  is  called,  of  a  railroad, 
divide  the  total  number  of  tons  (for  a  given  period)  carried 
one  mile  (or  the  "  ton  mileage  ")  by  the  number  of  miles  of  line 
operated.  Example:  Take  a  railroad  100  miles  long.  Sup- 
pose, to  make  it  as  simple  as  possible,  that  all  freight  carried 
was  for  half  its  length,  and  that  in  a  year  1,000,000  tons  were 
hauled  the  50  miles.  This  would  give  50,000,000  tons  hauled 
one  mile;  i.e.  1,000,000  tons  hauled  50  miles  is  the  same 
as  50,000,000  tons  hauled  one  mile.  Dividing  this  "  ton 
mileage  "  by  100  —  the  number  of  miles  of  line  operated  — 
we  get  500,000,  which  is  the  number  of  "  tons  carried  one 
mile  per  mile  of  line."  1  (See  "  Ton  Mile  "  and  "  Ton  Mile 
Cost.") 

Freight  Miles.  Same  as  "  ton  miles."  This  is  explained 
under  "  Freight  Density." 

Frisco.    Saint  Louis  and  San  Francisco  Railroad  Co. 

Frozen  Out.  Used  in  reference  to  a  broker  closing  out  a 
marginal  account  when  the  "  exhaust  price "  has  been 
reached.  (See  "  Exhaust  Price.")  If  one  should  lose  his 
position  as  officer  or  director  in  a  corporation,  by  a  prear- 
ranged plan  on  the  part  of  others  holding  the  control,  the 
expression  "  frozen  out  "  might  be  applied. 

Frs.  The  sign  used  in  the  French  monetary  system  for 
"  francs,"  as  $  is  for  our  dollar. 

Fruit.    United  Fruit  Co. 

Full  Stock.  This  term  is  used  to  distinguish  shares  of  a 
par  value  of  $100  from  shares  of  a  lesser  par  value,  say  $25, 
which,  for  example,  would  be  called  "  quarter  stock." 

Fully  Paid  (Full  Paid).    No  more  due;  no  further  payment 

1  Statistics  of  Railways  in  the  United  States,  1904.  Interstate  Commerce 
Commission. 


178  MONEY    AND    INVESTMENTS 

may  legally  be  demanded.  A  stock  is  "  fully  paid  "  when 
it  has  been  issued  in  exchange  for  its  face  value  in  cash,  or  its 
equivalent;  issued  in  exchange  for  its  value  in  property. 
In  many  States  it  is  unlawful  to  issue  stock  in  all,  or  at  least 
in  certain  classes  of,  corporations  except  as  "  fully  paid." 
This  law  is  sometimes  circumvented  by  property,  which  is 
desired  by  a  certain  corporation,  being  purchased  in  the  name 
of  some  disinterested  person,  and  by  him  sold  to  the  corpora- 
tion at  a  great  advance  in  price,  the  corporation  paying  him 
in  stock,  equivalent  in  its  face  value  to  the  price  at  which 
the  property  is  taken  by  the  corporation.  This  stock  is  after- 
wards distributed  in  accordance  with  the  previous  arrange- 
ment made.  This  is  a  questionable  proceeding,  but  is  a  practice 
which  has  been  largely  entered  into,  particularly  in  recent 
years.  (See  "  Non-assessable.") 

Funded  Debt.  The  bonded,  or  other  debt,  of  a  more  or  less 
permanent  nature. 

Funding.  Converting  debts  —  not  bonded  —  of  various 
amounts  and  maturities,  or  a  debt  now  or  soon  due,  into  a 
unified  form,  usually  with  a  fixed  rate  of  interest,  maturity, 
etc.  As  an  example,  imagine  a  city  to  have  outstanding 
debts  in  the  form  of  notes  which  fall  due  from  time  to  time, 
and  which  the  city  has  to  renew  or  extend,  and  which  it  ap- 
pears unable,  from  its  resources,  to  pay  off  for  a  term  of 
years.  By  the  method  of  renewing,  from  time  to  time,  ex- 
cessive rates  of  interest  are  often  paid,  and,  in  the  long  run, 
it  is  an  expensive  way  of  borrowing.  By  the  issuing  of  bonds, 
at  a  favourable  opportunity,  money  may  be  obtained  at  a 
lower  rate  of  interest,  and  a  saving  made  to  the  city.  The 
selling  of  bonds  in  this  case  to  pay  off  the  notes  is  called 
"  funding."  Unless  the  expenses  incurred  in  the  process  of 
"  funding  "  are  included  as  part  of  the  new  issue,  the  latter 
sold  at  a  discount,  or  a  premium  (or  bonus)  paid  to  retire  the 
former  debt,  the  "  funding  "  issue  should  be  equal  in  amount 
to  the  indebtedness  "  funded."  The  habit  is  to  issue  bonds 
to  "  fund  "  a  debt,  but  issuing  stock  or  any  more  or  less  per- 
manent kind  of  security  to  provide  for  floating  indebtedness 
is,  to  all  intents  and  purposes,  "  funding." 

Funding  and  Real  Estate  Mortgage  Bonds.  A  good  example 
of  an  issue  of  this  kind  is  that  of  the  Western  Union  Telegraph 
Co.,  which  has  an  authorized  issue  of  $20,000,000,  dated 
May  1,  1900.  These  are  secured  by  a  first  mortgage  upon  the 
company's  real  estate  in  New  York  and  Chicago,  together 
with  all  buildings,  fixtures,  and  telegraphic  equipment  thereon. 
The  company  agrees  that  no  future  lien  shall  be  created  upon 
any  of  its  real  and  personal  property  within  the  United  States 
having  priority  over  these  bonds,  or  create  any  mortgage 


MONEY    AND    INVESTMENTS  179 

without  recording  a  prior  lien  as  security  for  the  payment  of 
the  principal  and  interest  of  these  bonds. 

The  object  of  a  loan  of  this  kind  is  when  a  relatively  small 
issue  is  to  be  made  to  save  the  trouble  and  expense  of  mort- 
gaging all  the  property  of  a  company  by  selecting  certain 
parcels  of  real  estate  sufficient  to  properly  secure  the  issue. 

Funds.  (See  "  Cashier's  Check.")  By  the  term  "  funds  " 
is  generally  understood  cash  or  money,  checks,  drafts,  or  any 
such  instruments  which  can  readily  be  converted  into  money.1 

Futures.  (Explained  under  "  Grain.")  There  was  a 
United  States  Supreme  Court  decision  in  the  Chicago  Board 
of  Trade  case,  in  which  Judge  Oh>er  Wendell  Holmes  con- 
cluded with  the  statement  that  transactions  in  "  futures  " 
differ  from  mere  gambling  contracts.  He  said  in  part: 

"  People  will  endeavour  to  forecast  the  future  and  make 
agreements  according  to  their  prophecy.  Speculation  of  this 
kind  by  competent  men  is  the  self-adjustment  of  society  to 
the  probability." 

F.  &  A.  Interest  or  dividends  payable  semi-annually, 
February  and  August. 

G 

g.    Gold. 

Garnishment  (Garaishee).  A  method  of  attaching  property 
or  credits  belonging  to  a  debtor,  but  held  for  or  owed  to  him 
by  another.  For  example,  suppose  Robinson  owes  Brown 
$40,  which  the  latter  has  not  been  able  to  collect.  By  a  legal 
process,  he  attaches  Robinson's  bank  account  to  the  amount 
of  the  debt,  or,  as  it  is  called,  "  garnishees  "  the  account.  In 
Massachusetts  this  process  is  called  "  trusteeing." 

Gas  Company  Bonds.2  Issue  secured  by  first  mortgages,  or 
"  junior  mortgages  "  properly  protected,  upon  gas  works 
have  proven  a  satisfactory  class  of  investment.  The  per- 
centage of  loss  has  been  remarkably  small;  the  failures  of  gas 
companies  have  been  comparatively  few.  It  was  thought 
that  the  advent  of  electrical  lighting  would  injure  existing 
gas  companies,  but  improved  methods  of  manufacture  have 
enabled  them  to  reduce  rates  and  remain  prosperous. 

1  F.  A.  Cleveland  describes  "  funds  "  as  "  any  and  all  things  which  may 
be  accumulated  and  which  may  be  currently  used  in  a  community  in  ex- 
change for  goods  or  properties  of  others." 

*  For  the  idea  of  the  use  of  gas  as  an  illuminant,  the  world  is  indebted  to 
William  Murdoch,  a  Scottish  engineer.  F.  A.  Winsor,  a  German  by  birth, 
carried  out,  however,  the  first  street  lighting,  which  occurred  at  Pall  Mall, 
where  gas  lamps  were  used  Jan.  28,  1807.  In  1810  a  gas  company  was 
formed.  In  1813  Westminster  Bridge  was  permanently  lighted  by  gas 
lamps,  and  in  1816  the  general  use  of  gas  was  adopted  in  London. 


180  MONEY    AND    INVESTMENTS 

By  substituting  gas  for  the  low  candle  power  of  coal  a 
household  fuel  has  come  into  use  in  the  form  of  gas  stoves. 
These  are  a  source  of  great  income  to  the  gas  companies. 
Sir  George  Livesy  estimates  that  there  are  over  550,000  in  use 
in  London  alone. 

In  many  instances  the  combination  of  the  two  forms  of 
lighting  under  one  company  has  been  successful. 

The  usual  care  should  be  given  in  the  selecting  of  gas  com- 
pany securities  for  investment.  Net  earning  should  be  not 
less  than  twice  the  interest  charges;  the  mortgage  ought  not 
to  much  exceed  50  or  60%  of  the  replacement  value  of  the 
property;  the  franchise  must  outlive  the  bond  issue;  a 
reasonable  sinking  fund  is  desirable;  competition  must,  of 
course,  be  considered;  the  city  or  town  contract '  for  lighting 
should  be  at  a  satisfactory  rate  so  that  there  is  likelihood  of  its 
being  renewed  from  time  to  time,  and  rates  to  all  customers 
must  be  reasonable  compared  with  similar  conditions  else- 
where.2 

Natural  gas  propositions  should  be  approached  with  cau- 
tion. Many  of  them  are  proving  short-lived. 

The  following  quotation  from  a  Boston  newspaper  is  of  in- 
terest: "  American  experience  does  not  greatly  encourage 
this  policy  (municipal  ownership)  and  yet,  were  it  submitted 
to  a  majority  vote  in  many  municipalities,  adoption  would 
probably  follow.  Only  twenty  gas  systems  in  municipalities 
of  the  United  States  are  to-day  publicly  owned,  as  against 
nine  hundred  and  fifty-six  in  private  hands.  Electric  lighting, 
for  some  reason,  has  been  a  much  more  favoured  municipal 
enterprise,  the  figures  standing  one  hundred  and  ninety-three 
public  systems  to  eleven  hundred  and  ninety  private,  in  places 
having  a  population  of  more  than  three  thousand,  for  which 
these  figures  are  all  prepared.  Certain  things  the  community 
can  doubtless  do  better  in  its  public  capacity,  and  this  is 
roughly  indicated  by  the  decisions  which  Americans  have 
made." 

GB.    The  "  ticker  "  abbreviation  for  "  gold  bonds." 

Gen.  (or  Gen'l).     General  —  general  mortgage. 

General  and  First  Mortgage  Bonds.  See  "  General  First 
Mortgage  Bonds." 

General  Contango  Day.    See  "  Fortnightly  Settling-Days. " 

General  Expenses.      This  is  one  of  the  subdivisions  of  the 

1  Under  "  Electric  Light  Company  Securities  "  will  be  found   further 
information  relating  to  city  contracts,  which  applies  with  equal  force  here. 

2  The  tendency  of  gas  companies  is  to  reduce  the  price,  as  is  shown  by  the 
fact  that  in  1886  the  average  price  paid  by  the  consumers  of  Massachusetts 
was  $1.72,  from  which  time  there  has  been  a  steady  decline  down  to  the 
present  time,  when  it  is  but  little  in  excess  of  $1.00. 


MONEY    AND    INVESTMENTS  181 

form  prescribed  by  the  Inter-State  Commerce  Commission, 
for  the  classification  of  the  operating  expenses  of  a  railroad. 
It  includes  the  salaries  paid  clerks  and  attendants  and  general 
officers,  insurance,  legal  expenses,  general  office  expenses 
and  supplies,  stationery  and  printing  properly  belonging  to  the 
same,  and  other  expenses. 

General  First  Mortgage  Bonds.  It  is  difficult  to  understand 
why  the  word  "  first  "  should  appear  in  such  a  title  as  the 
above,  as  it  is  used.  In  practice,  such  an  issue  is  either  not 
secured  by  a  "  first  mortgage  "  at  all,  but  is  just  a  plain 
"  general  mortgage  "  (see  "  General  Mortgage  Bond  ")  or 
is,  at  the  best,  a  "  first  mortgage  "  on  but  an  insignificant 
part  of  the  property,  in  which  case,  "  general  AND  first  mort- 
gage "  would  be  the  proper  title.  To  be  sure,  a  "  general 
first  mortgage  "  may  become  a  FIRST  lien  after  the  earlier 
lien  issues  have  been  paid. 

General  Fund.  Money  not  appropriated  for  some  particular 
purpose,  but  which  may  be  used  for  general  and  miscellaneous 
expenses. 

General  Indorsement.  The  same  as  "  Indorsement  in 
Blank." 

General  Mortgage  Bonds.  This  title  has  taken  the  place  of 
the  old,  but  now  disliked,  "  blanket  mortgage."  Secured 
by  a  mortgage  upon  the  property  of  a  corporation  and  sub- 
ject to  earlier  mortgages  placed  upon  parts  or  all  of  its  prop- 
erty. This  is  a  very  common  method  of  borrowing  money  on 
the  part  of  railway  companies,  and  has  been  necessitated  in 
this  country  by  its  remarkable  growth  and  development. 
The  railroads,  which  at  the  time  of  their  early  construction 
provided  inadequately  for  the  enormous  demands  upon  their 
capacity  for  handling  traffic,  as  since  developed,  issued  bonds 
covering  the  property  at  the  time  of  its  construction,  many  of 
which  have  not  yet  matured.  The  enormous  increase  in  busi- 
ness of  such  a  railway  has  demanded  tremendous  enlarge- 
ments to  its  road  and  equipment,  and,  as  the  value  of  such 
property  is  largely  in  excess  of  the  original  mortgage  or 
mortgages  placed  upon  it,  a  "  general  mortgage,"  so-called, 
is  issued,  representing,  in  part,  the  value  of  the  property  in 
excess  of  the  earlier  mortgages.  When  such  a  "  general 
mortgage  "  is  issued,  it  is  usually  made  large  enough  not  only 
to  provide  for  the  needs  of  the  company  at  the  time  of  its 
issue  and  possibly  for  future  extensions  under  proper  re- 
strictions, but  to  set  aside  in  the  hands  of  the  trustee  of  the 
mortgage  sufficient  bonds  to  be  later  disposed  of  to  replace  the 
earlier  mortgages  as  they  fall  due.  This  automatically  re- 
sults in  a  "  general  mortgage  "  eventually  becoming  a  "  first 
mortgage." 


182  MONEY    AND    INVESTMENTS 

The  investment  value  of  the  above  depends  upon  the  stand- 
ing of  the  company,  — its  net  earnings  available  for  interest 
charges  upon  the  issue,  etc.,  —  the  amount  of  underlying  liens, 
and,  in  short,  what  equity  there  is  in  the  property  above  the 
general  mortgage  issue.  In  this  connection  read  also  "  Con- 
solidated Mortgage  Bond." 

George  Smith's  Money.  A  condition  existed  in  the  early  days 
in  the  West,  when  many  of  the  then  recently  created  Terri- 
tories were  suffering  from  a  deficiency  in  metallic  money,  and 
the  lack  of  a  proper  system  of  "  banks  of  issue."  In  1839 
two  Scotchmen,  George  Smith  and  Alexander  Mitchell, 
created  a  new  form  of  money  in  Wisconsin  by  obtaining  from 
the  legislature  of  that  Territory  a  charter  for  a  Marine  and 
Fire  Insurance  Company,  under  which  charter,  although  it 
contained  a  special  restriction  against  banking  privileges, 
notwithstanding,  the  company  advertised  to  "  receive  money 
on  deposit  and  transact  other  moneyed  operations."  "  Cer- 
tificates of  deposit  "  were  consequently  issued  in  sums  ranging 
from  $1  up  to  $10,  and  were  much  in  the  form  of  bank  bills. 
As  there  was  a  great  popular  need  for  something  of  this 
nature  in  the  form  of  money,  these  certificates  were  soon  in 
circulation  through  many  of  the  adjoining  Territories.  They 
were  redeemed  in  specie  at  the  central  office  at  Milwaukee 
and  at  agencies  in  other  Western  cities  in  New  York  exchange, 
at  the  then  current  rate. 

The  "  George  Smith  money  "  was  a  good  money,  and  was 
freely  accepted  through  that  section  of  the  country  so  long  as 
any  of  it  was  outstanding.  It  was  always  promptly  paid  upon 
presentation. 

Gilt-edged.  Highest  grade;  most  conservative  class  of 
investments;  those  in  which  loss  to  the  owner  is  least  likely 
to  occur.  One  writer  indefinitely  defines  "  gilt-edged  "  secu- 
rities as  "  those  suitable  for  the  investment  of  trust  funds." 

Give  Up.    To  disclose  the  name  of  one's  customer. 

GM.    The  "  ticker  "  abbreviation  for  "  general  mortgage." 

GNT.  The  "ticker"  abbreviation  for " land  grant,"  as 
"  land  grant  bonds." 

Gold  Banks.  Associations  may  be  organized  under  the 
National  Banking  Act  for  the  purpose  of  issuing  bank  notes 
payable  in  gold.  (See  "  Circulation.")  Such  banks  are  known 
as  "  National  Gold  Banks,"  or  "  Gold  Banks,"  and  to  take  out 
such  circulation  must  deposit  with  the  Treasurer  of  the  United 
States,  in  the  same  manner  as  prescribed  for  the  taking  out 
of  ordinary  circulation,  United  States  bonds  bearing  interest 
but  payable  in  gold,1  but  not  exceeding  eighty  per  cent,  of 

1  While  the  2%  Consols  of  1930  are  the  only  bonds  which  are  payable 


MONEY  AND;  INVESTMENTS  iss 

the  par  value  of  the  bonds  deposited.  These  notes  are  payable 
upon  presentation  at  the  bank  of  issue  in  gold  coin  of  the 
United  States  and  shall  be  so  redeemable. 

While  Section  5185  of  the  United  States  Revised  Statutes, 
authorizing  the  organization  of  "  gold  banks  "  has  not  ac- 
tually been  repealed,  practically  this  result  was  obtained, 
however,  by  the  Act  of  Feb.  14,  1880,  authorizing  the  conver- 
sion of  "  gold  banks  "  into  "  currency  banks."  As  a  result, 
there  are,  to-day,  no  "  gold  banks  "  in  existence. 

Gold  Bars.1  Bars  of  pure  gold.  (Refer  to  "  Assay  Office 
Bar.") 

Gold  Basis.  A  country  is  on  a  "  gold  basis  "  when  values 
are  measured  in  gold;  gold  is  the  monetary  standard.  (See 
"  Standard  of  Value.") 

Gold  Bonds.  In  America  bonds  payable  in  United  States 
gold  coin  of  the  present  standard  of  weight  and  fineness. 

Gold  Brick.  Any  unsound  dishonest  scheme  or  investment 
made  to  have  all  the  appearances  of  honesty  and  soundness. 

Gold  Certificates.  As  a  matter  of  convenience  to  the  public, 
the  United  States  Government  has  authorized  the  Secretary 
of  the  Treasury  to  receive  deposits  of  gold  coin  and  bullion  in 
sums  not  less  than  $20,  and  issue  certificates  therefor  in  de- 
nominations not  less  than  $10.  Inasmuch  as  these  certificates 
are  receipts  for  gold,  they  are  redeemable  in  gold  coin  by  the 
Treasurer  and  by  all  Assistant  Treasurers  of  the  United  States. 
The  law  provides  that  "  the  Secretary  of  the  Treasury  shall 
suspend  the  issue  of  gold  certificates  whenever  the  amount  of 
gold  coin  and  gold  bullion  in  the  Treasury,  reserved  for  the 
redemption  of  United  States  notes,  falls  below  one  hundred 
millions  of  dollars."  The  Secretary  is  also  empowered,  in 
his  discretion,  to  suspend  such  issue  whenever  and  so  long  as 
the  aggregate  amount  of  United  States  notes  and  silver 
certificates  in  the  general  fund  of  the  Treasury  shall  exceed 
$60,000,000;  he  must  also  see  that  at  least  one-fourth  of  all 
certificates  outstanding  shall  be  in  denominations  of  $50  or 
less.2 

On  Feb.  28,  1905,  the  face  value  of  these  certificates  out- 
standing amounted  to  $528,149,969. 

They  were  not  legal  tender,  but  receivable  for  customs, 

principal  and  interest  in  gold,  yet,  since  the  Act  of  March  14,  1900,  pro- 
vided that  the  Secretary  of  the  Treasury  shall  maintain  all  forms  of  United 
States  money  at  a  parity  of  value  with  gold,  it  seems  that  all  United  States 
bonds  would  do  for  the  purpose. 

1  Prescott,  in  his  "  Conquest  of  Mexico,"  speaks  of  the  ancient  Aztecs 
using  gold  "  cast  into  bars  "  as  part  of  the  regular  tribute  of  the  Southern 
provinces  of  the  empire. 

1  Act  of  March  14,  1900,  as  amended  March  4,  1907. 


184  MONEY    AND    INVESTMENTS 

taxes,  and  all  public  dues.*  They  may  be  used  as  part  of  a 
national  bank's  "  reserve." 

Gold  Coinage.  The  United  States  Government  provides  for 
free  and  unlimited  coinage  of  gold;  that  is  to  say,  gold  bullion 
of  standard  quality  may  be  deposited  at  the  mints  in  any 
amount  and  coined  for  the  benefit  of  the  depositor,  without 
any  charge  being  made  for  the  coinage.  If  the  bullion  is  not 
standard  a  charge  is  made  for  parting,  or  refining,  or  for  copper 
alloy,  as  the  case  may  be. 

Although  the  mints  may  lawfully  refuse  to  receive  for 
coinage  purposes  gold  bullion  of  less  value  than  $100,  in  prac- 
tice they  do  not  do  so. 

Gold  Coin  of  the  United  States.  "  Is  legal  tender  at  its  nom- 
inal or  face  value  for  all  debts,  public  and  private,  when 
not  below  the  standard  weight  and  limit  of  tolerance  pre- 
scribed by  law;  and  when  below  such  standard  and  limit  of 
tolerance  it  is  legal  tender  in  proportion  to  its  weight." 

Gold  coin  is  issued  by  the  Treasurer  of  the  United  States 
and  all  the  Assistant  Treasurers  in  redemption  of  Treasury 
Notes  of  1890,  United  States  Notes,  and  Gold  Certificates. 

Gold  Comer.    Described  under  "  Black  Friday." 

Gold  Exchange.  The  "  Gold  Exchange  "  grew  out  of  specu- 
lation in  gold  during  the  Civil  War,  and  was  organized  in  1864. 
It  was  here,  i.  e.  the  "  Gold  Room,"  as  it  was  called,  that  the 
bull  movement  in  gold  was  manipulated  which  resulted  in  the 
memorable  collapse  known  as  "  Black  Friday,"  to  which 
refer. 

Gold  Exchange  Standard.  The  monetary  system  under 
which  silver  and  minor  coins  form  the  chief  part  of  the  circu- 
lation, but  are  kept  at  a  fixed  value  in  gold  by  government 
control  of  their  quantity  and  by  the  sale  of  drafts  on  a  gold 
exchange  fund  at  par,  subject  to  the  usual  charges  for  gold 
exchange.1 

The  Philippine  Islands  and  Mexico  are  examples  of  the 
adoption  of  this  monetary  system. 

Gold  Export  Point.  Whenever  the  prices  of  foreign  "  ex- 
change "  reaches  the  point  where  it  is  cheaper  to  buy  gold 
bullion,  and  ship  same,  to  adjust  a  debt  due  than  to  buy 
"  exchange,"  the  "  gold  export  point  "  is  reached.  Considera- 
tion is  taken  of  cost  of  bullion,  expressage,  insurance,  loss  of 
interest  during  transit,  etc.  When  rates  are  rising  toward 
the  export  point  they  are  referred  to  as  "  unfavourable." 

The   London   Economist   has   for   years   been   quoting  the 

1  The  author  is  indebted  to  Mr.  Charles  A.  Conant,  the  able  author  of 
many  financial  publications,  for  furnishing  this  definition  of  "  Gold  Ex- 
change Standard." 


MONEY    AND    INVESTMENTS  185 

"  gold  export  point  "  at  $4.89,  and  the  "  gold  import  point  " 
at  $4.827,  but  recently  the  reduced  cost  of  freight  and  insur- 
ance, together  with  the  shorter  time  consumed  in  transmis- 
sion, have  tended  to  bring  the  two  points  nearer  together, 
and  so,  generally  speaking,  the  "  gold  export  point  "  is  now 
considered  to  be  $4.884  and  the  "  gold  import  point,"  figuring 
interest  at  6%,  as  $4.833. 

Gold  Export  and  Imports.  See  "  International  Movement 
of  Gold." 

Gold  Import  Point.1  Read  "  Gold  Export  Point,"  by  which 
it  will  be  seen  that  what  conditions  make  for  such  a  point  in  one 
country  as  against  another,  will  naturally  result  in  the  "  im- 
port point  "  in  the  other.  When  the  price  of  London  ex- 
change, for  example,  falls  to  about  $4.833  this  point  is  con- 
sidered to  be  reached.  As  it  tends  in  this  direction  it  is  called 
"  favourable."  Nevertheless,  on  Dec.  29,  1906,  "  sight 
exchange  "  on  London  fell  to  the  extremely  low  price  of 
$4.8265.75;  but  no  gold  was  imported.  This  was  due  to  the 
fact  that  the  Bank  of  England  discount  rate  was  ruling  6%, 
and  the  bankers  did  not  wish  to  force  an  increase  in  the  rate, 
which  would  have  been  the  natural  result  of  exporting  gold 
from  that  country  to  America. 

Gold  Inflation.  There  is  a  theory  that  a  relation  exists  be- 
tween the  supply  of  gold  and  the  prices  of  commodities.  Prof. 
Cairnes  claimed  that  the  rise  in  prices  was  the  gradual  result  of 
the  gold  discoveries  in  Australia  and  California. 

The  space  at  the  author's  disposal  will  not  permit  of  a 
covering  of  the  ground  here.  Those  desiring  to  thoroughly 
cover  the  subject  cannot  do  better  than  to  refer  to  Conant's 
"  Principles  of  Money  and  Banking,"  in  which  he  treats  most 
exhaustively  upon  the  matter. 

Gold  Movement.    See  "  International  Movement  of  Gold." 

Gold  Note.  Another  very  common  term  for  "  gold  certifi- 
cate." It  is  also  used  in  reference  to  any  promissory  note 
which  calls  for  payment  in  gold. 

Gold  Point.  By  this  may  be  understood  either  the  "  gold 
import  point  "  or  the  "  gold  export  point  "  to  which  subjects 
reference  may  be  had. 

Gold  Product  of  the  United  States.  The  Secretary  of  the 
Treasury  gives  the  estimated  product  of  this  country  for  the 
calendar  year  1904  as  $80,464,700,  and  for  1905,  as  esti- 
mated by  the  mint,  it  was  $88,180,700,  and  for  1906,  $96,- 
101,000. 

1  Since  the  Secretary  of  the  Treasury  has  established  the  precedent  as 
explained  under  the  first  foot-note  to  "  International  Movement  of  Gold  " 
this  changes  the  "  import  point." 


186  MONEY    AND    INVESTMENTS 

Gold  Product  of  the  World.  From  the  time  of  the  discovery 
of  America  to  1520,  Dr.  Adolph  Soetbeer  estimates  the  average 
annual  product  of  gold  as  only  $3,855,000.  At  no  time  did  the 
average  output  exceed  $16,500,000  until  the  decade  ending 
1850,  during  which  time  the  average  was  $36,393,000.  Be- 
ginning with  1851,  the  average  did  not  drop  below  $100,000,- 
000  except  from  1881  to  1885,  during  which  time  it  was 
$99,116,000.  In  1896  it  exceeded  $200,000,000  and  in  1905 
reached  the  amount  of  $376,289,200.1  The  estimated  total 
world's  product  from  1493  to  1905  inclusive  is  $11,673,855, 800. 
The  above  averages,  unless  otherwise  stated,  are  based  upon 
5,  10,  or  20  year  periods. 

Gold  Reserve.  In  order  that  the  paper  money  of  a  nation 
may  pass  among  its  people  at  its  face  value,  the  belief  must 
prevail  that  the  government  will,  upon  request,  redeem  the 
paper  in  full  in  coin.  By  an  act  of  the  Congress  of  the  United 
States  in  the  year  1900,  the  duty  was  imposed  upon  the  Secre- 
tary of  the  Treasury  of  maintaining  at  an  equal  value  all  forms 
of  governmental  money  and  redeeming  the  Government's 
legal-tender  notes  at  par.  In  order  to  do  this  he  shall  keep  a 
"gold  reserve"  of  $150,000,000  for  the  only  purpose  of  re- 
deeming, on  presentation,  the  United  States  notes  and 
Sherman  notes.  Upon  the  reserve  falling  below  $100,000,000 
he  shall  sell  United  States  Government  bonds  to  replenish  it. 
Gold  Standard  Act.  See  "  Financial  Bill." 
Gold  Standard  of  Value.  See  "  Standard  of  Value." 
Gold  Treasury  Certificates.  See  "  Gold  Certificates." 
Good  Delivery.  The  rules  of  the  stock  exchanges  provide 
certain  regulations  regarding  the  signing  of  stock  certificates  on 
the  back  for  transfer,  and  other  regulations  regarding  similar 
matters  and  actual  physical  condition  of  securities.  For  a 
security  to  be  "  good  delivery  "  all  these  regulations  must  be 
complied  with. 

Good  until  Cancelled.  An  order  to  buy  or  sell,  and  which 
remains  good  until  countermanded  by  the  one  giving  the 
same.  It  is  frequently  abbreviated  by  the  letters  "  G.  T.  C.," 
i.  e.  "  good  till  cancelled."  It  is  the  same  thing  as  an  "  open 
order,"  so  called. 

Good-Will.  When  this  term  is  used  in  reference  to  a  business 
or  industry,  it  indicates  the  business  already  established. 
It  is  the  material  value  of  a  business  as  a  profit-producing 
enterprise,  either  realized  or  prospective. 

Some  writers  define  this  subject  as  the  bonded  debt  of  a 
plant  less  its  valuation  at  forced  sale.  Others,  as  the  ad- 

1  Estimated  by  the  United  States  Mint. 


MONEY    AND    INVESTMENTS  187 

vantage  or  benefit  which  is  acquired  by  an  establishment, 
beyond  the  mere  value  of  the  capital,  funds,  or  property 
employed  therein. 

Buildings,  machinery,  etc.,  may  be  almost  valueless  for 
any  other  purpose  than  for  the  particular  product  they  are 
turning  out,  and,  consequently,  the  indebtedness  against  such 
a  property  is,  to  quite  an  extent,  dependent  upon  its  success. 
"  Good-will  "  varies  much  in  different  industries.  In  a  case 
where  there  is  more  or  less  of  a  monopoly  it  may  be  very 
valuable,  or  where  the  character  of  the  goods  manufactured 
enjoys  such  an  established  reputation  and  demand  that  there 
is  little  danger  of  competition.  But  long  consideration  should 
be  taken  of  this  item  in  the  assets  of  a  corporation  in  determin- 
ing the  amount  of  indebtedness  which  may  be  placed  upon  the 
same.  It  is  better  financiering  to  value  the  "  good-will  " 
only  in  reference  to  the  issue  of  stock,  and  then  conserva- 
tively. 

Goschens.    See  first  part  of  "  Consols." 

Go  Short.    See  "  Selling  Short,"  meaning  the  same. 

Gould  Lines  (or  Stocks).  Stocks  of  corporations  in  which 
George  J.  Gould,  son  of  the  famous  Jay  Gould,  has  a  pre- 
dominating influence;  notably,  Western  Union  Telegraph 
Co.,  Missouri  Pacific,  Texas  &  Pacific,  Denver  &  Rio  Grande, 
Rio  Grande  Western,  Wabash,  St.  Louis  Southwestern,  West- 
ern Pacific,  Western  Maryland,  Wheeling  &  Lake  Erie,  and 
the  Central  Branch  Railway  Companies. 

Gourde.  The  monetary  unit  of  Haiti,  equivalent  to  $.965 
United  States  money. 

Government  Assay  Bar.    See  "  Assay  Office  Bar." 

Government  Bond  Interest  Anticipated.  There  have  been 
numerous  instances  when  the  Secretary  of  the  Treasury  has 
afforded  relief  to  a  stringent  money  market  by  the  payment 
of  interest  on  United  States  Government  bonds  some  time 
previous  to  its  actually  being  due.  This  occurred  Dec.  15, 
1905,  after  which  date  coupons  due  Jan.  1,  1906,  were  paid 
on  presentation,  and  checks  mailed  to  registered  holders. 
The  amount  due  was  $4,200,000,  which  was  expected  to  give 
some  assistance,  for  money  rates  were  extremely  high  at  the 
time. 

Government  Bonds.  Formerly  we  understood  these  to  be 
the  interest  bearing  obligations  of  the  United  States  of  America, 
but  now  that  New  York  has  become  such  an  international 
money  centre,  and  Americans,  like  the  English,  have  begun  to 
deal  in  foreign  securities,  many  of  the  other  government  issues 
—  Germany,  Japan,  Great  Britain,  etc.,  —  are  largely  held 
here. 


188  MONEY    AND    INVESTMENTS 

A  brief  sketch  of  the  United  States  Government's  debt  from 
its  earliest  creation  may  not  be  amiss. 

Naturally,  the  first  indebtedness  was  caused  by  the  Ameri- 
can Revolutionary  War,  and,  thanks  to  the  far-sightedness 
of  Alexander  Hamilton,  the  debt  was  properly  financed  and 
never  repudiated.  The  new  Government  of  the  United  States, 
after  the  close  of  the  war,  found  itself  burdened  with  a  total 
debt  of  $72,775,895.  Fluctuations  of  the  debt  have  been  as 
follows: 

Jan.  1,  1791 $75,463,476.52 

Jan.  1,  1804 86,427,120.88 

Jan.  1,  1812 45,209,737.90 

Then  followed  the  war  with  Great  Britain,  and,  as  a  result, 
the  debt  increased  in  1816  to  $127,334,933.74.  In  1835  the 
country  was  practically  out  of  debt,  then  another  war, 
namely,  with  Mexico,  resulted  in  a  debt  being  created,  which 
was: 

July  1,  1849 $63,061,858.69 

July  1,  1857 28,699,831.85 

The  expense  of  the  Indian  War  increased  this  debt,  until 
it  reached  in  1861$90,580,873.72.  Then  followed  the  Civil  War, 
which  resulted  in  the  enormous  total  interest  bearing  debt 
Aug.  31,  1865,  of  $2,381,530,294.96.  From  this  point  the 
debt  was  gradually  reduced,  so  that  on  July  1,  1893,  there 
were  only  $585,073,100  bonds  drawing  interest,  outstanding. 
During  the  Cleveland  administration,  bonds  to  the  amount 
of  $262,315,400  were  issued,  in  order  to  keep  the  currency  of 
the  country  upon  a  gold  basis.  During  the  war  with  Spain 
$198,792,660  additional  were  issued,  but  after  this  war  a 
slight  reduction  was  made  in  the  debt  from  surplus  revenues, 
and  on  July  1,  1905,  the  total  interest  bearing  debt  of  this 
government  was  only  $895,158,340,  which  compares  very 
favourably  with  the  debts  of  other  nations. 

There  are  some  very  salient  features  about  the  credit  of  the 
United  States,  which  is  the  highest  of  any  nation  on  earth. 
In  the  first  place,  our  Government  bonds  sell  at  a  higher  price, 
or,  in  other  words,  at  a  lower  interest  return,  than  the  bonds 
of  any  other  nation.  There  are  over  $600,000,000  outstanding 
bearing  only  2%  interest,  being  the  lowest  rate  of  any  national 
issue.  This  is  due  to  several  reasons,  viz.:  the  existing  belief 
in  the  ability  of  the  Government  to  meet  its  obligations;  the 
fact  that  it  maintains  the  standard  of  gold  payments,  and, 
added  to  this,  the  non-taxable  features  of  the  bonds,  for  they 
cannot  be  taxed  by  either  Government,  State,  or  other  munic- 
ipality of  the  Union,  and,  besides,  carry  the  privilege 


MONEY    AND    INVESTMENTS  189 

of  deposit  with  the  government  by  national  banks  to  secure 
circulation;  that  is,  the  issuing  of  national  bank  notes. 

Government  bonds  are  issued  in  two  forms,  coupon  and 
registered.  (See  "  Coupon  Bonds  "  and  "  Registered  Bond.") 
The  former  may  be  converted  into  registered  bonds  of  the 
same  loan,  but  there  is  no  law  authorizing  the  conversion 
of  registered  into  coupon  bonds.  Coupon  bonds,  for  exchange 
into  registered,  should  be  addressed  to  the  "  Secretary  of  the 
Treasury,  Division  of  Loans  and  Currency."  The  Depart- 
ment makes  no  charge  for  conversion. 

In  case  of  loss  of  registered  bonds,  notify  the  Secretary  of 
the  Treasury  without  loss  of  time  in  order  that  a  "  caveat  " 
may  be  entered  to  prevent  the  transfer  of  the  missing  bonds 
on  the  department's  books.  Thoroughly  describe  each  bond, 
giving  its  number,  the  face  value,  act  under  which  issued,  rate 
per  cent.,  etc.,  all  of  which  is  another  argument  for  retaining 
a  careful  description  of  one's  securities.  The  Treasury  De- 
partment will  not  stop  payment  on  lost  coupon  bonds,  or 
coupons  themselves,  and  all  such  will  be  paid  to  the  party 
presenting  them  to  the  department;  no  attention  whatsoever 
being  paid  to  notices  to  the  contrary  from  the  legitimate 
owners. 

There  are  many  regulations  in  which  the  investor  or  dealer 
in  Government  bonds  should  be  versed;  such,  for  instance,  as 
relating  to  relief  in  cases  of  destroyed  or  defaced  bonds  and 
destroyed  coupons,  transfer  of  bonds,  assignment  of  bonds, 
and  of  the  same  by  attorneys,  etc.,  all  of  which  are  set  forth 
very  specifically  in  a  book  entitled  "  Regulations  of  the 
Treasury  Department  in  Relation  to  United  States  Bonds," 
which  it  is  advisable  to  apply  for,  as  only  the  most  essential 
points  are  touched  upon  in  the  treatment  of  the  subject 
herein. 

The  issue  of  Government  bonds  bearing  interest  and  out- 
standing to-day  are  as  follows: 

Panama  Canal  Bonds  bearing  2%  interest,  redeemable 
Aug.  1,  1916,  but  due  Aug.  1,  1936,  interest  payable  quarterly, 
beginning  with  February  1st. 

Consols  of  1930  bearing  2%  interest,  redeemable  after  April 
1,  1930,  interest  payable  quarterly,  beginning  with  January  1. 

Loan  of  1908-1918,  bearing  3%  interest,  redeemable  after 
Aug.  1,  1908,  interest  payable  quarterly,  beginning  with 
February  1. 

Loan  of  1925,  bearing  4%  interest,  redeemable  after  Feb. 
1,  1925,  interest  payable  quarterly,  beginning  with  Febru- 
ary 1. 

The  "transfer  books"  are  closed  during  the  month  im- 
mediately preceding  dates  of  interest  payments,  with  the 


190  MONEY    AND    INVESTMENTS 

exception  of  the  4%  loans  of  1925,  in  which  case  the  books 
close  on  the  15th  day  of  the  month  preceding  interest  pay- 
ment. Bonds  not  received  for  transfer  prior  to,  or  upon,  the 
day  fixed  for  the  closing  of  the  books  will  not  be  transferred 
until  after  the  reopening  of  the  same,  and,  consequently, 
the  interest  for  that  quarter  will  be  paid  to  the  parties  whose 
names  appear  in  the  old  bonds. 

There  are  many  large  banks  and  banking  houses  which 
make  a  specialty  of  dealing  in  Government  bonds.  Trans- 
actions are  not  in  as  great  a  volume  upon  the  stock  exchanges 
as  through  direct  dealings  with  bankers,  such  as  the  above, 
and  prices  at  which  purchases  or  sales  are  made  without  the 
exchange  may  vary  slightly  from  the  stock  exchange  quota- 
tions at  the  time. 

Much  information  may  be  obtained  in  relation  to  Govern- 
ment bonds  from  those  making  a  specialty  of  dealing  in  them, 
who,  in  some  cases,  have  issued  books  full  of  data  upon  the 
subject. 

On  Oct.  31,  1905,  the  national  banks  of  the  United  States 
held  as  security  for  circulation  about  98%  of  all  the  2%  con- 
sols of  1930,  and  a  total  of  United  States  Government  bonds 
of  all  kinds  of  $493,912,790.  This  does  not  include  the  large 
amount  held  by  the  national  banks  for  other  purposes. 

The  Supreme  Court  of  the  United  States  handed  down  a 
decision  in  1906  to  the  effect  that  interest  upon  United  States 
Government  bonds  is  taxable,  whether  the  bonds  are  owned 
by  an  individual  or  corporation,  and  whether  the  interest 
is  held  in  the  form  of  draft,  check,  or  money. 

Government  securities  may  be  considered  among  the 
luxuries  of  investments.  Those  of  our  own  country  and 
Great  Britain  rank  the  highest.  Probably  nothing  safer  can 
be  found,  if  the  low  interest  return  is  no  objection.  They 
always  afford  a  ready  market,  and  are  in  constant  demand 
among  banking  institutions,  insurance  companies,  trustees, 
etc.  The  market  value  is,  of  course,  influenced  by  political 
and  industrial  conditions,  so  likewise  of  other  investments. 
Government  securities  are  constantly  fluctuating,  but  the 
price  variations  are  of  no  great  moment.  At  least,  it  is  fair 
to  assume  that  even  in  a  great  crisis  the  fluctuations  would 
probably  be  less  than  the  average  of  other  securities.  Al- 
though Government  bonds  are  not  the  most  profitable  outlet 
for  money,  it  is  unquestionably  a  fact  that  some  investors 
would,  in  the  long  run,  be  better  off  with  the  low  rate  of 
interest  afforded  by  them,  than  results  from  their  tak- 
ing a  greater  risk  by  seeking  in  other  directions  for  higher 
rates. 

The  writer  does  not  undertake  to  treat  of  this  subject 
beyond  the  two  nations  above  referred  to.  It  is  impossible 


MONEY    AND    INVESTMENTS  191 

to  treat  of  the  Government  securities  throughout  the  world. 
Investment  in  French  "  rentes/7  German  and  Japanese  bonds, 
and  in  those  of  many  other  nations,  is  unquestionably  safe; 
but  many  South  American  countries  should,  to  illustrate, 
be  approached  with  caution.1 

Government  Depository.    See  "  United  States  Depository." 

Government  Note.    Government  paper  money. 

Governments.  "  United  States  Government  bonds."  (See 
"  Government  bonds.") 

Grab.  A  definition  for  the  slang  meaning  of  this  word  has 
been  recently  given  in  the  New  York  State  legislature  by  one 
of  the  State  Senators,  who  said:  "It  is  giving  great  power 
for  nothing,  sneaking  bills  through  which  have  a  hidden 
purpose." 

Grace.    See  "  Days  of  Grace." 

Grade.  The  per  cent,  of  grade  means  so  many  feet  vertically 
in  100  feet  horizontal.  A  5%  grade,  for  instance,  means  a  rise 
of  5  feet  in  each  100  feet  of  horizontal  distance  travelled. 
A  mile  representing  5,280  feet,  a  1%  grade  means  a  rise  of  52.8 
feet  in  that  distance;  a  4%  grade  means  a  rise  of  211.2  feet 
in  a  mile. 

Graft.  This  is  not  a  new  thing;  it  has  existed  time  out  of 
mind.  "  Graft  "  is  an  old  word  which  has  recently  been 
given  a  new  meaning  to  meet  the  American  demand  for  time- 
saving,  by  expressing  much  in  little.  It  denotes  dishonesty 
in  business;  corruption  among  public  officials,  or  the  abuse 
of  any  trust  to  a  dishonest  money-making  end.  Technically 
it  does  not  mean  putting  the  hand  in  the  safe  and  deliberately 
stealing;  but  the  abuse  of  opportunities  possessed  over  one's 
fellows  to  make  money.  Selling  one's  vote  or  influence, 
bribery,  etc.,  are  examples. 

Grain.  In  buying  or  selling  wheat,  corn,  etc.,  there  are  a 
few  essential  points  to  understand  although  entering  into 
detail  upon  this  subject  is  not  within  the  scope  of  this  work. 
Trading  in  grain  is  not  a  common  field  for  the  investment  of 
funds  on  the  part  of  such  as  it  is  the  intention  of  this  book  to 
assist. 

Chicago  is  the  leading  grain  and  provision  speculative 
market  in  the  world,  and,  on  account  of  its  being  such  a  large 
distributing  market,  is  very  apt  to  dominate  prices.  Short 
or  abundant  crops  of  course  naturally  affect  the  price  of 

^'Memoranda  Concerning  United  States  Bonds,"  Fisk  &  Robinson. 
"Government  Bonds,"  National  City  Bank,  New  York.  "The  American 
Statesman  Series."  "Regulations  of  the  Treasury  Department  in  Rela- 
tion to  United  States  Bonds."  Annual  reports  of  the  Secretaries  of  the 
Treasury,  etc. 


192  MONEY    AND    INVESTMENTS 

grain.  In  dealing  in  grain,  one  usually  speculates  in  what  are 
called  "  futures;  "  that  is,  if  you  should  buy  grain  in  Febru- 
ary, you  would  very  likely  buy  May  grain,  but  if  you  should 
retain  your  grain  and  not  sell  it  until  the  first  day  of  May, 
it  would  become  "  cash  "  or  "  seller  the  month  "  grain,  sub- 
ject, of  course,  to  what  charges  may  be  imposed  for  storage, 
etc.,  after  delivery.  Literally  speaking,  when  in  February 
you  buy  what  is  known  as  May  grain,  you  buy  it  for  May 
delivery.  Such  transactions  are  called  "  futures."  If,  on  the 
first  day  of  May,  to  carry  out  this  same  example,  you  still 
wish  to  hold  your  investment,  you  sell  for  May  delivery  (or 
"  cash  "  grain,  if  delivery  has  been  made)  and  purchase  the 
same  amount  of  either  June  or  July  grain;  that  is,  you 
transfer  it  to  some  other  month.  This  is  known  as  "  switch- 
ing." 

About  three  to  five  cents  per  bushel  is  the  usual  "  margin  " 
required  on  such  transactions  in  grain  for  future  delivery 
(see  "Margin"),  though,  of  course,  the  speculator  will  be 
called  upon  to  increase  this  amount  if  the  market  is  in  an 
unsteady  condition. 

The  usual  trading  unit  in  grain  is  5,000  bushels.  The  com- 
mission for  the  purchase  or  sale,  or  for  the  purchase  and  sale 
is  |  cent  per  bushel. 

Grain  Bill.  A  "  bill  of  exchange  "  (see  that  subject)  drawn 
against  a  shipment  of  grain. 

Grain  Pit.    See  "  Pit." 

Grain  Roads.  The  railway  companies,  particularly  of  the 
West  and  Middle  West,  which  derive  large  earnings  from  the 
transportation  of  agricultural  products;  such  as  the  Chicago 
&  Northwestern  Railway,  Chicago,  Burlington  &  Quincy 
R.  R.,  etc. 

Granby.  The  Granby  Consolidated  Mining,  Smelting  & 
Power  Co.,  Limited.  (Copper.) 

Granger  (or  Granger  Road).    See  "  Grain  Roads." 

Great  Holidays.  "  Legal  holidays  "  observed  in  all  the 
States,  as  Sunday,  Fourth  of  July,  and  Christmas. 

Great  Western.  Chicago  Great  Western  Railway  Co.  Fre- 
quently known  as  the  "  Maple  Leaf." 

Greenbacks.    These  are  the  same  as  "  United  States  notes." 

Greene.  The  Greene  Consolidated  Copper  Co.  There  is  also 
the  Greene  Consolidated  Gold  Co. 

Greene-Cananea.  Greene  Cananea  Copper  Co.,  a  virtual 
consolidation  of  the  Greene  Consolidated  Copper  Co.,  and  the 
Cananea  Central  Copper  Co. 

Gresham's  Law.    Jevons,  in  his  "  Money  and  the  Mechan- 


MONEY    AND    INVESTMENTS  193 

ism  of  Exchange,"  briefly  explains  the  law,  the  truth  of  which 
Sir  Thomas  Gresham  perceived  three  centuries  ago,  as  "  bad 
money  drives  out  good  money,  but  good  money  cannot  drive 
out  bad  money."  Jevons  goes  on  to  say  further  that  "  the 
people,  as  a  general  rule,  do  not  reject  the  better,  but  pass 
from  hand  to  hand  indifferently  the  heavy  and  the  light  coins, 
because  their  only  use  for  the  coin  is  as  a  medium  of  exchange. 
It  is  those  who  are  going  to  melt,  export,  hoard,  or  dissolve 
the  coins  of  the  realm,  or  convert  them  into  jewelry  and  gold 
leaf,  who  carefully  select  for  their  purposes  the  new  heavy 
coins." 

Groat.    See  "  Fourpence." 

Gross.  Including  everything  —  no  deduction  being  made. 
This  is  more  specifically  set  forth  under  the  next  sub- 
ject. 

Gross  Earnings.  The  total  amount  of  income  received  by  a 
corporation  during  any  stated  period  from  the  operation  of 
its  legitimate  business.  In  some  cases  the  income  derived 
from  rentals  or  securities  owned  of  other  corporations, 
in  which  possibly  some  of  the  surplus  money  of  the 
company  may  be  invested,  is  included  in  gross  earnings. 
Strictly  speaking,  however,  such  items  as  this  latter  should 
come  under  a  separate  heading. 

Ground  Floor  (Price).  A  price  less  than  which  no 
one  obtained  the  security.  A  term  often  used  to  designate 
the  price  at  which  the  originators  of  a  financial  proposition, 
such  as  a  syndicate,  obtained  a  participation  or  interest 
therein,  as  distinguished  from  the  price  at  which  the  same 
securities  were  later  sold  to  the  public  at  large. 

"  He  got  in  on  the  ground  floor,"  meaning  that  he  was  a 
participant  in  the  original  syndicate. 

G.  T.  C.    Good  till  cancelled. 

GTD.    The  "  ticker  "  abbreviation  for  "  guaranteed." 

Guanajuato.  The  Guanajuato  Consolidated  Mining  and 
Milling  Co.  (Gold.) 

Guarantee.  An  undertaking  that  the  engagement  or 
promise  of  another  shall  be  performed.  The  4%  bonds  of  the 
Ogdensburg  &  Lake  Champlain  R.  R.  Co.  are  guaranteed 
by  the  Rutland  R.  R.  Co.,  which  means  that  the  latter  promises 
their  payment  in  case  the  former,  for  any  reason,  does  not 
fulfill  its  obligation. 

An  issue  of  bonds  may  be  guaranteed  in  several  ways: 
First,  the  principal  of  the  bond  may  be  guaranteed  only; 
second,  the  interest  only;  third,  guaranteed  both  principal 
and  interest.  These  are  the  three  principal  forms. 

The  word  "  guarantee  "  is  often  used  in  the  same  sense  as 


194  MONEY    AND    INVESTMENTS 

"  guaranty,"  but  in  such  cases  the  latter  is  more  correct. 
"  Guarantee  "  may  also  be  used  to  designate  the  party  for 
whom  the  "  guaranty  "  is  made.  In  the  above  case  the 
Ogdensburg  &  Lake  Champlain  R.  R.  Co.  is  the  "  guarantee." 
Also  read  next  subject  and  "  guaranty." 

Guaranteed  Bonds.  (What  is  set  forth  under  the  next 
subject  may  be  read  in  this  connection.)  The  main  point 
is  not  to  judge  a  bond  on  its  guaranty  alone,  but  look  upon  it 
as  the  obligation  of  the  issuing  company  without  considering 
the  guaranteeing  company,  and  if  that  does  not  prove  the 
mortgaged  property  of  sufficient  value  to  the  guarantor  to 
make  the  guaranty  worth  while,  then  it  is  no  proper  outlet 
for  hard-earned  savings.  Naturally,  the  investor  must 
examine  into  such  matters  as  the  "  form  of  guaranty  "  (see 
that  subject,  and  "  Guaranteed  by  Indorsement  ");  the  terms 
and  conditions  upon  which  it  was  given;  whether  the  principal 
and  interest  are  both  guaranteed,  etc. 

Guaranteed  by  Indorsement.  This  is  a  term  very  frequently 
used.  There  is  a  distinction  between  "  guaranteed  by  indorse- 
ment "  and  "  guaranteed."  An  issue  of  bonds,  for  instance,  has 
been  "  guaranteed  "  by  a  company  other  than  the  one  issuing  the 
same;  these  bonds  may  have  been  guaranteed  after  their  issue, 
and  the  fact  of  such  guarantee  may  not  appear  on  the  bonds. 
In  case  of  an  issue  "  guaranteed  by  indorsement  "  each  bond 
bears  upon  it  the  statement  that  it  is  "  guaranteed  "  by  the 
corporation  in  question,  and  the  signature  of  the  proper  officer 
of  such  corporation  appears  in  the  statement  setting  forth 
the  "  guarantee." 

Guaranteed  Stocks.  Shares  issued  by  one  corporation  for 
the  payment  of  the  principal,  or  dividends  on,  one  or 
more  other  corporations  have  legally  assumed  responsibility. 
Stocks  may  be  guaranteed  as  to  dividends  only,  or  as  to  both 
principal  and  dividends.  Such  stocks  are  a  very  favourite  form 
of  investment,  especially  guaranteed  railway  company  shares. 
A  great  many  of  the  large  railway  systems  comprise  smaller 
properties  which  have  been  leased  for  a  term  of  years, 
sometimes  the  length  of  such  lease,  for  all  practical  purposes, 
being  in  perpetuity,  the  smaller  property  being  leased  to  the 
parent  company  in  consideration  of  a  fixed  rental,  from  which 
sum  are  distributed  dividends  to  the  shareholders.  In  the 
case  of  a  leased  line  to  any  one  of  the  well  established  railway 
properties  of  the  country,  there  can  be  little  question  as  to 
the  safety  of  the  investment.  In  the  case  of  a  guaranteed 
stock  the  main  points  necessary  to  consider  are  the  ability  to 
pay  on  the  part  of  the  lessor  company  and  the  value  of 
such  leased  line  to  that  company.  Of  course,  it  is  well  to 
ascertain  the  validity  of  the  contract  between  the  two  com- 


MONEY    AND    INVESTMENTS  195 

panies,  but  under  the  present  ability  of  expert  lawyers  to 
raise  legal  quibbles  over  fine  points,  there  seems  little  reason 
to  suppose  that  any  rich  and  powerful  railway  company 
could  not  find  a  means  to  invalidate  any  lease  which  it  thought 
profitable  to  get  rid  of,  and,  therefore,  the  safety  of  guaran- 
teed stocks,  like  many  other  investments,  among  other  things, 
depends  upon  the  probable  intention  on  the  part  of  the 
guarantor  to  fulfil  the  obligation.  This  latter  point,  however, 
need  not  always  be  given  very  serious  consideration,  because,  as 
stated  above,  stocks  bearing  the  guaranty  of  our  well-estab- 
lished railway  properties,  as  a  class,  certainly  present  a  mini- 
mum of  risk  to  the  investor,  and  it  is  not  well  to  doubt  the 
intention  to  pay  on  the  part  of  the  present  and  future  managers 
of  such  corporations. 

Many  of  our  guaranteed  stocks  may  legally  be  purchased  by 
savings  banks  of  our  Eastern  States,  and,  consequently,  com- 
mand prices  which  reduce  the  interest  return  to  within  the 
neighbourhood  of  4%.  A  great  many  of  them  are  non-taxable 
when  held  by  citizens  of  the  State  in  wrhich  the  roads  are 
located,  and,  withal,  there  are  so  many  good  features  about 
guaranteed  railway  stocks  that  they  must  be  considered  as 
one  of  our  most  conservative  forms  of  investment.  There 
are  numerous  stocks  of  this  class  in  wrhich  the  guaranty  ex- 
pires in  a  comparatively  few  years.  The  price  at  which  such 
stocks  sell  should  be  based  upon  their  being  worth  not  over 
$100  a  share  at  the  time  of  the  expiration  of  the  lease  or 
guaranty.  In  other  words,  they  should  be  figured  for  their 
interest  return  as  a  bond  which  has  a  fixed  date  of  maturity, 
unless  there  is  every  reason  to  suppose  that,  at  the  expira- 
tion of  the  lease,  it  will  be  renewed  upon  as  favourable  terms 
as  at  present  existing.  There  are  some  guaranteed  railroad 
shares  which  now  pay  dividends  at  the  rate  of  6%  or  over  per 
annum,  the  leases  of  which  expire  at  no  distant  date,  and  of 
which,  owing  to  the  ability  of  the  lessor  company  to  be  in 
position  to  dictate  terms,  it  is  fair  to  assume  that  no  re- 
newal will  be  made  which  will  warrant  better  than  4%  div- 
idends in  the  future. 

There  are  some  large  railway  corporations  which  are  bur- 
dened with  the  leases  of  a  great  many  smaller  companies,  which 
latter  do  not  return  sufficient  earnings  to  warrant  the  pay- 
ment of  the  rental.  It  is  probable  that  a  great  many  such 
leases  would  not  be  made  to-day  on  the  same  terms  as  origi- 
nally. In  some  instances  they  resulted  from  insiders  buying 
up  stocks  of  small  independent  companies,  selling  at  low 
figures,  and,  after  obtaining  the  control,  leasing  them  to 
connecting  railway  lines  for  a  term  of  years  at  a  high  rental. 
This  kind  of  financiering  proved  very  profitable  from  the 
increase  brought  about  in  the  market  price  of  the  shares. 


196  MONEY    AND    INVESTMENTS 

The  moral  side  of  such  an  action  we  will  not  discuss,  but  it  all 
has  a  bearing  upon  the  renewal  of  such  leases  after  they 
expire. 

"  Guaranteed  stocks,"  other  than  railway  issues,  must 
depend  for  their  safety  entirely  upon  the  value  of  the  guaran- 
tee and  the  necessity  of  the  guaranteed  company  to  the 
parent  company. 

Guarantor.  One  who  promises  that  the  engagement  of 
another  shall  be  performed.  See  "  Guarantee  "  —  in  that 
case  the  Rutland  R.  R.  Co.  is  the  "  guarantor." 

Guaranty.  In  financial  matters,  "  guaranty,"  or  "  form  of 
guaranty,"  usually  means  the  printed  or  written  form, 
properly  signed,  upon  a  security,  whereby  some  party,  not 
originally  issuing  the  security,  promises  its  payment;  that 
is,  guarantees  the  same. 

A  "  guaranty  "  may  not  appear  upon  the  bond  or  stock 
itself,  as  explained  under  "  Guaranteed  by  Indorsement." 
The  form  of  "  guaranty  "  either  appearing  upon  the  security, 
or  set  forth  in  some  separate  contract,  must  have  careful 
consideration  on  the  part  of  the  investor.  For  instance,  in 
the  case  of  a  bond,  the  form  of  "  guaranty  "  should  be  such 
that  the  guaranteeing  company  must  live  up  to  its  guarantee, 
if  necessary  to  do  so,  BY  PAYING  THE  SUM  CALLED  FOR  INTO 

THE   HANDS   OF  THE   TRUSTEE   OF  THE   MORTGAGE,   SO   that   the 

coupons  will  be  paid  as  presented  and  properly  cancelled 
by  the  trustee.  This  is  to  prevent  the  guaranteeing  company 
from  purchasing  the  coupons  and  holding  them  as  a  claim 
against  the  mortgaged  property.  A  simple  wording  of  a 
"  guaranty  "  of  this  kind  is  as  follows:  "  For  value  received 
the  Ohio  &  Florida  Railway  Co.  guarantees  and  assures  the 
payment  of  the  principal  and  interest  of  the  foregoing  bond 
at  the  office  of  the  Penn  Trust  Co.,  in  the  city  of  Philadelphia, 
Pa.,  as  and  when  same  respectively  come  due." 

The  form  above  is  that  part  of  the  form  of  "  guaranty  " 
which  compels  the  guaranteeing  company  to  pay  the  interest 
and  principal  of  the  bond  at  the  office  of  the  trust  company, 
which  is  the  point  it  is  intended  to  emphasize  here. 

Also  ^  see  that  the  property  guaranteed  is  of  sufficient 
value  in  earning  capacity  and  otherwise  to  the  guaran- 
teeing company  so  that  there  may  never  in  the  future  be 
occasion  for  the  latter  to  try  to  evade  its  liability.  In 
other  words,  do  not  purchase  a  guaranteed  security  merely 
because  it  bears  the  "  guaranty  "  of  some  other  strong  cor- 
poration. Ignore  such  "  guaranty  "  for  the  time  being,  and 
consider  the  value  of  the  property  independently  and  its 
value  to  the  guaranteeing  company.  Exceptions  undoubtedly 
may  be  taken  to  this  last,  as  in  the  case  of  some  of  our  well 


MONEY    AND    INVESTMENTS  197 

thought  of  railroad  companies,  but,  in  a  general  way,  this 
suggestion  is  worth  considering. 

Guardian.  One  legally  intrusted  with  the  care  of  the  per- 
son, and  management  of  property,  of  a  minor,  imbecile,  or 
other  person  incapable  of  managing  his/  affairs.  Usually  ap- 
pointed by  the  court,  but  may  sometimes  be  appointed  under 
a  will. 

Guilder.  The  old  name  for  the  monetary  unit  of  value  in 
The  Netherlands;  a  coin  equal  to  $.402  United  States  money. 
Also  called  "  Gulden,"  but  properly  now  "  Florin." 

Gulden.    See  "  Guilder." 

Guinea.  An  old  English  piece  of  money  which  has  not 
been  coined  since  1813,  equal  to  21  English  shillings  or  about 
$5.10  United  States  money. 

Gunning  (for)  a  Stock.  At  times,  when  a  banking  house  is 
known  to  be  carrying  an  excessive  amount  of  some  stock, 
another  broker  —  or  a  combination  —  may  use  every  means 
to  depress  its  price,  and  produce  a  sudden  "  break,"  thus 
being  able  himself  to  buy  at  lower  prices.  The 'reverse  of  the 
operation  may  be  undertaken  to  compel  those  "  Short  "  to 
"  cover." 

Gusher.  A  self-flowing  oil  well,  and  one  which  produces 
large  quantities. 

H 

Half-Crown.  A  silver  coin  of  Great  Britain,  equal  in  value 
to  about  $.608  United  States  money. 

Half-Dime.    See  "  Five-Cent  Silver  Piece." 

Half-Dollar.  A  silver  coin  of  the  United  States  containing 
173.61  grains  of  fine  silver  and  19.29  of  alloy.  "  Legal  tender  " 
in  amounts  not  in  excess  of  $10. 

Half-Eagle.  A  gold  coin  of  the  United  States  of  the  value 
of  $5,  containing  116.10  grains  of  fine  gold,  and  12.90  grains 
of  alloy. 

Halfpenny.  A  small  coin  of  Great  Britain,  equal  to  about 
one  cent  United  States  money. 

Half-Sovereign.  A  gold  coin  of  Great  Britain,  equal  in 
value  to  10  shillings,  or  one-half  the  English  "  pound  ster- 
ling," and  to  $2.433  United  States  money. 

Half-Stock.  Shares  with  a  par  value  of  $50;  two  shares 
to  equal  one  with  a  par  value  of  $100.  Pennsylvania  R.  R. 
Co.,  Reading  Company,  etc. 

Hammered.    In  America,  this  is  used  to  express  a  marked 


198  MONEY    AND    INVESTMENTS 

forcing  down  of  prices,  as,  for  example,  "  prices  were  ham- 
mered to-day." 

Hammond's  Time.  "  At  fourteen  minutes  after  two  p.  M., 
(on  the  New  York  Stock  Exchange)  the  words  Hammond's 
Time  will  be  printed  on  the  tape,  and,  shortly  after,  the  lever 
of  the  instrument  will  give  fifteen  distinct  beats. 

"  At  the  end  of  fifteen  beats  it  is  2h.  15m.  p.  M.,  and  the 
close  of  the  recognized  settlement  time  for  transactions  of  the 
Exchange."  1 

This  is  frequently  referred  to  as  "  time,"  but  the  full  name 
is  derived  from  a  watchmaker  by  the  name  of  Hammond 
who  furnishes  official  time  to  the  Stock  Exchange. 

Hard  Coalers.  Railroad  companies,  the  earnings  of  which 
are  very  largely  dependent  upon  the  transportation  of  anthra- 
cite coal,  including  such  roads  as  the  Reading,  the  Delaware, 
Lackawanna  &  Western,  the  Lehigh  Valley,  etc. 

Harden.  To  advance  in  price.  "  The  market  hardened;  " 
a  general  advance  in  prices. 

Hard  Money.     Metallic  money;  not  paper  money. 

Hard  Spot  in  the  Market.  Good  strength  caused  by  strong 
and  active  buying. 

Harriman  Interests  (or  Lines).  E.  H.  Harriman  practically 
controls  the  Union  Pacific,  Southern  Pacific,  and  the  San 
Pedro,  Los  Angeles  and  Salt  Lake  R.  R.  Companies.  He  has  a 
very  large  influence,  amounting  virtually  to  control,  in  the  Illi- 
nois Central,  Baltimore  &  Ohio,  and  the  St.  Joseph  and  Grand 
Island  Railway  Companies.  Besides  all  these,  he  has  a  large 
influence  in  such  roads  as  the  Atchison,  Topeka  &  Santa 
Fe*,  the  New  York  Central  &  Hudson  River,  the  Chicago, 
Milwaukee  &  St.  Paul,  and  the  Chicago  &  Alton  Railway 
Companies. 

Hawaiian  Island  Bonds.  Issued  under  authority  of  Congress, 
but  the  obligation  of  the  Hawaiian  Islands,  and  not  of  the 
United  States  Government.  The  Congress  has  exempted  from 
taxation  the  "  Fire  Claim  4's,"  so-called,  which  were  issued  to 
reimburse  the  owners  of  property  destroyed  at  the  time  of 
the  bubonic  plague  at  Hawaii.  The  question  has  been  raised, 
however,  whether  the  rest  of  the  Hawaiian  issues  are  tax- 
exempt  in  the  United  States.  A  legal  opinion  has  been 
rendered  which  indicates  that  such  is  probably  the  case. 

Hawley  Lines  (or  Roads).  What  are  commonly  known  as 
the  "  Hawley  Lines  "  include  but  two  roads,  the  Minneap- 
olis &  St.  Louis  R.  R.  Co.,  and  the  Iowa  Central  Ry.  Co., 

1  "  The  Ticker  Book  and  Manual  of  the  Tape,"  by  S.  8.  Fontaine  and 
R.  L.  Neville. 


MONEY    AND    INVESTMENTS  199 

but  the  Hawley  interests  are  more  extensive,  and  reach  other 
properties,  among  which  may  be  mentioned  the  Toledo,  St. 
Louis  &  Western  R.  R.  Co. 

Heavy.  "  The  market  was  heavy  on  profit  taking;  " 
meaning  that  prices  had  advanced  sufficiently  to  tempt  people 
to  sell  their  securities;  enough  to  cause  a  decline  in  prices, 
for,  in  order  to  find  a  market  for  the  amount  of  securities  of- 
fered, lower  prices  had  to  be  made  to  induce  purchasing. 
On  account  of  this  lowering  in  prices  the  market  is  called 
"  heavy." 

Hedge.  To  buy  or  sell  in  order  to  lessen  an  anticipated  loss. 
An  illustration  would  be  in  the  case  of  one's  having  purchased 
1,000  shares  of  stock  in  anticipation  of  a  rise,  instead  of  which 
the  stock  actually  declines,  with  indications  of  still  greater 
decline.  The  owner  of  the  thousand  shares  of  stock  sells  all 
his  holdings  and  then  goes  "  short  "  (see  "  Selling  Short  ") 
another  thousand  shares,  hoping  thereby  to  profit  sufficiently 
to  make  up  his  loss  already  sustained  and  possibly  something 
besides. 

High  Finance.  A  typical  example  of  what  is  understood 
by  this  term  would  be:  such  jugglery  with  other  people's 
money  as  has  been  disclosed  in  the  recent  life  insurance 
company  scandals. 

A  writer,  referring  to  a  prominent  man  who  has  become  rich 
through  rather  unsavoury  methods,  says:  "  After  his  first 
coup  he  forsakes  for  ever  the  cold  arithmetic  of  commerce  for 
the  rule  of  guess,  dream,  hope,  and  '  I  will,'  which  constitute 
the  mathematics  of  '  high  finance.'  ' 

Another  writer  remarks:  "  High  finance  and  low  morality 
go  together." 

Hill  Roads.  James  G.  Hill  has  a  predominating  influence  in 
the  management  of  the  Great  Northern  Railway  Co.,  and  the 
Northern  Pacific  Railway  Co.  These  two  control  the  Chicago, 
Burlington  &  Quincy  R.  R. 

Hoarding  Money.    To  hide  it  in  secret  places. 

Hocking  Valley.  The  Hocking  Valley  Railway  Co.  Suc- 
cessor to  the  Columbus,  Hocking  Valley  &  Toledo  Railway  Co. 

Holder  in  Due  Course.  The  holder  of  an  instrument  other 
than  the  one  to  whom  it  was  originally  given,  when  obtained 
in  the  due  course  of  business  and  in  a  legal  way.  The  rights 
of  a  "  holder  in  due  course  "  are  quite  complex,  but,  in  brief, 
such  a  holder  of  an  instrument  possesses  the  same  free  from 
any  defect  of  title  of  prior  parties,  and  holds  the  same  free 
from  defences  available  for  such  parties  among  themselves, 
and  may  enforce  payment  of  the  instrument  for  the  full 
amount  thereof  against  all  parties  liable  thereon. 


200  MONEY    ANt)    INVESTMENTS 

The  Statutes  of  Michigan  say  that:  "  A  holder  in  due  course 
is  a  holder  who  has  taken  the  instrument  under  the  following 
conditions: 

"  First,  That  it  is  complete  and  regular  upon  its  face. 

"  Second,  That  he  became  the  holder  of  it  before  it  was 
overdue,  and  without  notice  that  it  had  been  previously  dis- 
honoured, if  such  was  the  fact. 

"  Third,  That  he  took  it  in  good  faith  and  for  value. 

"  Fourth,  That  at  the  time  it  was  negotiated  to  him  he  had 
no  notice  of  any  infirmity  in  the  instrument  or  defect  in  the 
title  of  the  person  negotiating  it."  1 

Holding  Company.  Formed  for  the  especial  purpose  of 
holding  or  owning  the  shares  of  another  company  or  other 
companies;  an  arrangement  whereby  financial  combinations 
may  indirectly  control  operating  companies  through  owner- 
ship of  their  capital  stocks.  A  good  example  is  that  of  the 
Amalgamated  Copper  Co.,  which  is  a  "  finance  company," 
so-called,  controlling  the  stocks  of  certain  operating  copper 
companies. 

This  is  generally  done  to  circumvent  the  law,  and  thus 
bring  about  indirectly  the  virtual  consolidation  of  two  or 
more  companies,  when  to  do  so  directly  would  be  illegal;  or 
where  it  may  be  impossible  to  bring  about  an  actual  consoli- 
dation by  the  acquisition  of  all  the  outstanding  stock.2  The 
"  sub-companies  " 3 —  as  the  several  corporations  thus  brought 
together  are  termed  —  maintain  their  individual  existence 
as  before,  but  the  officials  managing  the  same  are  appointed 
by  the  "  holding  company."  This  latter  is  incorporated  under 
the  laws  of  some  such  State  as  New  Jersey,  Maine,  or  West 
Virginia,  which  has  enacted  laws  to  attract  such  corpora- 
tions. The  Northern  Securities  Corporation,  brought  into 
existence  under  the  laws  of  the  first  named  State,  is  one  of  the 
most  colossal  examples  of  the  kind  yet  attempted.  In  this 
case  it  was  desired  to  consolidate  certain  railways;  the  laws 
of  some  of  the  States,  crossed  by  the  roads,  prohibited  the 
consolidation  of  parallel  or  competing  lines.  It  was  held  that 
these  were  such,  and,  therefore,  to  get  around  this,  another 
corporation  was  formed  in  New  Jersey  and  its  shares  issued 
in  exchange  for  the  shares  of  the  railways  in  question.  How- 
ever, this  has  been  held  to  be  illegal  by  the  Supreme  Court  of 

1  Act  265,  P.  A.  1905. 

2  The  "  holding  company  "  might  succeed  in  acquiring  the  total  capitali- 
zation of  another  corporation,  dissolve  it,  and  take  actual  possession  of  the 
property  represented.     It  is  possible  also  for  a  "  holding  company  "  to 
acquire  possession  of  an  unincorporated  business,  but  it  is  almost  entirely 
for  the  acquisition  of  stocks  of  other  companies  that  a  "  holding  company" 
is  created. 

3  Subsidiary  companies. 


MONEY    AND    INVESTMENTS  201 

the  United  States,  and  the  stocks  so  taken  in  exchange  have 
been  ordered  distributed  among  whom  the  Court,  in  its 
decision,  conceives  to  be  the  proper  owners.  (See  foot-note  to 
"  Merger/') 

A  "  holding  company  "  may  or  may  not  result  in  good.  In 
general,  the  principle  is  wrong,  as  it  naturally  results  in  stock 
watering,  and  concentrates  control.  It  brings  about  un- 
healthful  stock  gambling  and  stifles  competition.  Efforts 
have  been  made  in  at  least  one  State  Legislature  to  limit  to  a 
comparatively  small  sum  the  amount  of  the  capital  stock  of 
one  company  which  may  be  held  by  another,  thus  preventing 
the  obtaining  of  control  in  this  way. 

Holding  the  Market.  This  is  done  by  buying,  as  offered, 
enough  of  the  security  in  question  to  prevent  its  decline  in 
price. 

Home  Rails.  Used  in  Great  Britain  to  denote  securities  of 
railways  in  the  British  Isles,  but,  in  general,  would  indicate 
the  railway  securities  of  the  country  wherein  the  term  is 
used. 

Honour.  To  pay.  A  draft  is  "  honoured  "  when  it  is  paid 
upon  presentation,  if  it  is  a  "  sight  draft,"  and  "  honoured  " 
when  "  accepted  "  if  a  "  time  draft." 

House  of  Issue.  A  banking  house  which  has  the  selling  of  a 
given  issue  of  securities. 

How  to  Keep  a  Bank  (or  Trust  Company)  Account.  See 
"  Bank  Account." 

How  to  Open  a  Savings  Bank  Account.  Although  require- 
ments of  banks  in  the  various  sections  of  the  country  differ 
somewhat  as  to  receiving  deposits,  yet  the  mode  of  procedure 
as  stipulated  by  one  of  the  large  metropolitan  institutions  is 
complete  enough  to  cover,  in  a  general  way,  all  cases. 

On  entering  the  bank,  the  intending  depositor  will  be  asked 
by  an  employee  whether  a  new  deposit  is  contemplated,  as 
upon  the  latter  depends  the  colour  of  the  printed  blank  which 
he  will  take  and  make  entry  of  the  amount  thereon.  This 
slip,  together  with  your  money,  you  will  take  to  the  "  receiving 
teller's  "  window,  being  careful  not  to  fold  either  the  slip  or 
the  bank  bills,  if  any.  The  latter  should  be  laid  out  flat,  all 
facing  one  way.  If  you  deposit  checks,  write  your  name  on 
the  back  of  each,  regarding  which  see  "  Indorse  "  and  "  In- 
dorse for  Deposit."  Remember  that  the  bank  does  not  agree 
to  accept  checks,  and  accepts  them  only  for  collection  for  the 
account  of  the  depositor.  It  is  better  for  the  depositor  to 
have  his  checks  converted  into  cash  before  entering  the 
bank. 

The  "  receiving  teller  "  will  ask  you  to  sign  your  name  in 


202  MONEY    AND    INVESTMENTS 

what  is  known  as  a  "  signature  book,"  and  will  ask  certain 
questions,  such  as  your  address,  name  of  father  and  mother, 
and  date  of  birth.  He  will  also  hand  you  a  card,  upon  which 
you  will  also  sign  your  name,  this  card  containing  blanks  to 
be  filled  out  with  similar  information  to  that  which  was 
entered  in  the  "  signature  book."  Some  banks  require  other 
information  than  the  above,  such  as  place  of  residence,  post- 
office  address,  occupation,  name  of  husband  or  wife,  if  married, 
etc. 

The  teller  will  then  enter  the  amount  of  your  deposit  in 
what  is  called  a  "  pass-book  "  or  "  deposit-book,"  and  hand 
the  same  to  you.  See  that  his  entry  agrees  with  the  amount 
of  your  deposit,  and  the  matter  is  closed  so  far  as  making  a 
new  deposit  is  concerned. 

In  making  additional  deposits,  and  stating  your  intent  so 
to  do  to  the  employee  above  referred  to,  he  will  take  a  different 
blank  (ticket),  and  enter  thereon  the  number  of  your  pass- 
book, your  name  as  it  appears  on  such  book,  your  present 
address,  and  the  amount  of  your  deposit.  Again,  you  should 
be  careful  not  to  fold  the  bills  or  ticket,  laying  the  former  out 
straight  and  all  facing  one  way.  The  ticket,  your  money, 
and  your  pass-book,  you  will  take  to  the  receiving  teller,  who 
will  make  the  entry  in  your  book  and  return  the  same  to  you. 
Again,  and  at  all  times,  verify  the  amount  of  his  entry.  If 
you  are  to  deposit  checks,  the  same  instructions  as  already 
given  in  relation  to  them  applies. 

In  case  deposits  are  to  be  made  by  mail,  write  a  letter 
giving  the  same  information  as  provided  in  the  deposit  ticket, 
enclose  with  your  "  pass-book  "  and  deposit,  and  send,  prefer- 
ably, by  registered  mail. 

At  all  times  sign  your  name  exactly  as  appears  on  the 
"  signature  book  "  in  the  bank.  If  it  is  given  there  as  "  Maria 
Jones,"  do  not  sign  your  letter  otherwise,  as,  for  instance, 
"  Mrs.  James  T.  Jones."  Be  explicit  in  giving  the  proper 
address  for  the  return  of  the  "  pass-book." 

As  to  withdrawals:  You  will  present  your  "  pass-book  "  at 
the  "  paying  teller's  "  window,  who  will  identify  you  by  your 
signature,  which  he  will  verify  with  the  one  upon  the  signa- 
ture card.  If  the  amount  exceeds  $100,  he  will  ask  you  ques- 
tions, and  your  replies  must  agree  with  the  information  entered 
on  the  card  as  regards  your  father's  name,  mother's  name, 
etc.  You  will  sign  a  receipt  for  the  money,  the  withdrawal  of 
which  will  be  entered  upon  your  "  pass-book  "  and  then  you 
will  depart. 

If  it  is  desirable  to  withdraw  money  by  mail,  you  will  find 
at  the  back  of  most  "  pass-books  "  a  form  of  order  which  you 
may  copy  and  fill  out  and  forward  to  the  bank,  accom- 


MONEY    AND    INVESTMENTS  203 

parried  by  your  "  pass-book,"  at  all  times  following  instruc- 
tions regarding  signature  and  precise  address,  as  suggested 
above. 

Whether  making  deposits  or  withdrawals,  one  should 
acquaint  himself  with  the  rule  of  the  particular  bank  with 
which  he  is  doing  business  in  relation  to  when  deposits  begin 
to  draw  interest  or  when  interest  may  be  sacrificed  by  a  too 
early  withdrawal.  In  some  savings  banks  deposits  begin  to 
draw  interest  only  from  some  stated  day  each  three  months; 
in  others,  every  month,  and  so  on.  Therefore,  any  money 
deposited  on  the  25th  day  of  January  might  not  begin  to  draw 
interest  until  the  first  day  of  April.  In  making  withdrawals, 
interest  may  be  sacrificed.  That  is  to  say,  any  money  with- 
drawn previous  to  a  certain  date  —  in  accordance  with  the 
above  illustration  we  will  suppose  it  to  be  withdrawn  some- 
time previous  to  the  first  of  April  —  interest  would  be  lost  on 
that  amount  of  money  from  the  first  of  January  up  to  the  date 
of  withdrawal. 

Most  institutions  require  that  the  money  shall  have  been 
on  deposit  a  certain  length  of  time,  say  three  months,  in  order 
to  be  entitled  to  any  interest  whatsoever. 

Parents  occasionally  wish  to  make  a  deposit  in  the  name  of 
a  young  child.  The  best  way  to  do  this  so  that  the  money  can 
be  withdrawn  without  trouble  is  to  have  the  deposit  made  in 
the  names  of  both  the  child  and  one  of  the  parents,  as  follows: 
"  John  Black  or  Clara  Black;  "  this  will  permit  John,  the 
father,  withdrawing  the  money  at  any  time.1 

1  In  many  of  our  cities  there  is  a  mixed  foreign  population,  and  savings 
banks  so  located  have  to  consider  this  fact,  which  is  best  set  forth  by  a  letter 
from  W.  S.  Tibbets,  of  Somersworth,  N.  H.  : 

"  I  am  afraid  the  present  custom  of  this  bank  in  regard  to  deposits  and 
withdrawals  will  not  be  representative  of  the  State  banks,  as  we  have  so 
mixed  a  population.  I  try  to  make  the  act  as  simple  as  is  consistent  with 
safety.  After  talking  pigeon  English  with  John  Jones  of  Russia,  Sweden, 
Turkey,  Armenia,  Italy,  Greece,  or  Canada,  and  coming  to  the  conclusion 
that  he  has  some  money  that  he  wishes  to  place  in  the  bank,  I  take  what  we 
call  a  signature  book  headed  '  I  hereby  agree  to  the  by-laws  of  the  Somers- 
worth Savings  Bank.'  I  enter  in  this  the  number  of  the  deposit  book  I 
intend  to  issue;  then  pass  him  the  book  and  request  him  to  sign  his  name 
after  the  number,  and  then  to  write  the  town  or  city  where  he  lives  on  the 
same  line;  then  select  a  card  and  enter  his  name  and  town;  then  pass  him 
the  card  and  request  him  to  write  in  the  answers  to  the  questions.  While 
he  is  doing  that  I  make  out  a  ledger  card  and  deposit  book  numbered  the 
same;  pass  him  the  deposit  book;  place  the  ledger  card  and  identifi- 
cation or  index  card  in  a  drawer  to  be  checked  back  and  accounted  for  after 
business  hours. 

"  When  we  receive  the  deposit  by  mail,  which  is  a  frequent  occurrence 
now,  I  enter  the  name  and  address  'by  W.  S.  Tibbets,  Treas.,'  on  the 
signature  book,  and  after  the  name  I  write  '  by  mail.'  Then  enclose  the 
card  with  the  deposit  book  by  registered  mail,  requesting  him  to  sign  his 
name  and  fill  out  the  questions  and  return  card  by  mail  to  bank.  Until 
the  card  is  returned  we  keep  a  blank  card  with  name  and  number. 


204  MONEY    AND    INVESTMENTS 

How  to  Open  a  Trust  Company  Account.  See  "  Trust  Com- 
pany Account." 

Humbolt.     Humbolt  Copper  Mining  Co. 

Hung  Up.  To  own  anything  undesirable;  something  which 
either  cannot  be  disposed  of  at  all,  or  without  loss. 

Hypothecate.  To  place  on  deposit  collateral  security; 
stocks,  bonds,  etc.,  as  a  pledge  for  a  loan. 


Ice.    American  Ice  Co. 

Illinois  Central.    Illinois  Central  R.  R.  Co. 

Immediate  Shipment.  A  Chicago  Board  of  Trade  term, 
calling  for  shipment  within  three  business  days. 

IMP.    The  "  ticker  "  abbreviation  for  "  improvement." 

Imperial  Bank  of  Germany.    See  "  Bank  of  Germany." 

Import  Point  of  Gold.    See  "  Gold  Import  Point." 

Improvement.    See  "  Betterment." 

Improvement  Bond.    See  next  subject. 

Improvement  Mortgage  Bonds.  A  "  junior  mortgage  "  is 
usually  understood.  An  "  improvement  mortgage  "  secures 
an  issue  of  bonds  necessitated  in  order  to  provide  funds  for 
improvements,  additions,  betterments,  etc.,  to  a  property. 
As  in  the  case  of  a  "  general  mortgage  bond,"  it  is  customary 
to  make  the  authorized  issue  large  enough  to  also  provide 
for  future  improvements  when  needed,  and  to  replace  earlier 
mortgage  bonds  as  they  mature  or  can  be  paid  off.  Their 
investment  value  depends  not  only  upon  the  credit  standing 
of  the  company,  but  upon  the  amount  of  bonds  whose  claims 
must  be  satisfied  first,  the  character  of  the  improvements  for 
which  issued,  etc.  Consider  them  from  the  standpoint  of 
at  least  a  "  second  "  and  probably  a  "  third  mortgage  bond." 

An  issue  of  this  class  is  that  of  the  Denver  and  Rio  Grande 
R.  R.  Co.  Gold  5's,  brought  out  to  provide  means  for  laying  a 
third  rail  to  broaden  the  narrow-gauge  road  to  standard  gauge 
and  for  other  improvements. 

"  Street  improvement,"  and  "  public  improvement  "  bonds, 
among  the  municipal  issues,  are  often  referred  to  as  "  im- 
provement bonds." 

"  In  case  the  person  cannot  write  his  name  I  write  it  for  him  '  by  W.  S. 
Tibbets,  Treas.,'  and  let  him  make  a  cross  over  it. 

"  In  case  of  deposits  by  an  executor,  administrator,  guardian,  or  one 
person  for  another,  after  he  enters  the  name  in  the  signature  book  he  writes 
'  by '  and  affixes  his  signature,  and  then  fills  out  the  card  for  the  other 
person." 


MONEY    AND    INVESTMENTS  205 

IN.     The  "  ticker  "  abbreviation  for  "  income." 

Inactive  Account.  A  bank  account  against  which  very  few 
checks  are  drawn  and  at  infrequent  intervals,  and  to  the  credit 
of  which  deposits  are  not  often  made;  or  an  account  with  a 
broker  which  shows  infrequent  purchases  and  sales  on  the 
part  of  the  customer. 

Inactive  Market.  When  sales  are  growing  less  in  volume 
and  transactions  are  few  and  for  small  amounts. 

Inactive  Stocks  or  Bonds.  Securities  which  are  bought  and 
sold  only  at  infrequent  intervals;  seldom  quoted;  difficult 
for  the  public  at  large  to  ascertain  the  market  value  of. 
There  are  brokers,  or  bankers,  in  nearly  every  important  city 
who  make  a  business  of  dealing  in  inactive  securities  in 
general,  or  are  specialists  in  regard  to  certain  ones.  (See 
"  Active  Stocks  or  Bonds.") 

In  and  Out.  A  speculation  of  short  duration,  as  a  purchase 
of  a  certain  stock  followed  by  a  quick  sale  of  the  same. 

In-Clearer.  The  English  term  for  a  bank  clerk  who  enters 
in  the  bank's  clearing  books  at  the  "  clearing-house  "  the 
items  against  his  bank  as  received,  and  who  determines  the 
"  clearing-house  balance "  for  his  bank.  This  term  dis- 
tinguishes him  from  the  "  out-clearer,"  who  is  the  clerk  at  the 
bank  making  similar  records  of  items  against  other  banks  for 
collection.  (See  subjects  in  quotations.) 

Income.  The  income  of  an  individual  is  generally  supposed 
to  be  the  money  returned  to  him  yearly  from  his  investments; 
the  interest  return  from  his  stocks,  bonds,  mortgages,  real 
estate,  etc.  Of  course,  the  meaning  can  be  extended  to  in- 
clude profits  from  a  business,  or  gains  of  all  kinds,  and  such 
is  the  usual  dictionary  meaning;  but  in  finance  there  has  been 
a  general  tendency  to  mean  only  the  return  from  money  in- 
vested outside  of  one's  direct  business,  if  he  has  any.  The 
income  from  a  stock  arises  from  profits  of  the  corporation, 
and  is  divided  among  the  stockholders  in  the  form  of  divi- 
dends, and  may  vary  from  time  to  time. 

The  income  from  bonds  and  mortgages  is  generally  a  fixed 
amount  and  is  called  interest.1 

1  Edwin  A.  Howes,  Jr.,  raises  this  point,  which  is  well  to  bear  in  mind: 
"  Income  of  property  consists  of  the  proceeds  of  what  the  property  pro- 
duces, the  profit  which  comes  from  its  use  in  business,  or  what  is  paid  for 
its  use  by  another  than  its  owner.  Principal,  or  capital,  is  the  property 
itself.  The  absolute  owner  of  the  property  is  likely  to  treat  as  income,  not 
only  the  earnings  of  the  principal  property,  but  all  increase  which  conies 
from  an  increase  in  the  value  of  the  property  itself,  treating  as  principal 
what  he  paid  for  the  property,  and  as  income  all  excess  over  the  original 
investment.  A  person  entitled  to  the  use  or  income  of  property,  or  a 
trustee  whose  duty  it  is  to  pay  income  to  one  person  or  set  of  persons,  hold- 


206  MONEY    AND    INVESTMENTS 

Income  Basis  (or  Return).  See  "  Net  Return  upon  the 
Investment." 

Income  Bonds.  There  is  very  little  difference  between  an 
"  income  bond  "  and  "  preferred  stock,"  except  that  upon 
the  former  the  interest  is  expected  to  be  paid  if  earned.  The 
management  may  decide  otherwise,  however.  Such  a  bond 
is  usually  secured  by  a  pledge  of  the  net  earnings  of  the  cor- 
poration after  payment  of  interest  and  sinking  fund,  if  any, 
upon  all  indebtedness  having  a  prior  claim.  An  "  income 
bond  "  may  be  "  cumulative;  "  that  is,  if  the  earnings  in  any 
one  year  do  not  suffice  to  pay  the  interest,  the  sum  lacking  is 
carried  forward  into  following  years  until  paid  in  full.  Also 
called  "  Preferred  Bonds,"  or  "  Preference  Income  Bonds," 
if  having  some  preference  rights  over  other  issues.  They  are 
sometimes  redeemed  by  "  sinking  funds "  and  in  some 
instances  acquire  mortgage  rights  if  interest  is  unpaid,  or  if 
principal  is  unpaid  at  maturity.  In  the  case  of  there  being 
no  mortgage  rights,  "  income  bonds  "  are  often  known  as 
"  debenture  incomes."  If  they  carry  the  convertible  feature, 
as  set  forth  under  "  Convertible  Bond,"  they  are  termed 
"  convertible  incomes." 

A  bond  issue  of  this  nature  may  have  a  detrimental  effect 
upon  the  value  of  all  stocks  of  a  company,  as  it  lessens  the 
likelihood  of  dividends  upon  the  same. 

This  is  not  a  desirable  class  of  securities.  Too  much  depends 
upon  the  board  of  directors. 

Inconvertible  Paper  Money.  Money  for  which  there  has  not 
been  provided  satisfactory,  if  any,  arrangements  for  its  con- 
version into  standard  money.  This  is  also  referred  to  as 
"  irredeemable  paper  money." 

Incorporate.    See  "  Corporation." 

Indenture.  This  is  generally  understood  to  be  a  contract, 
an  agreement  under  seal,  or  a  deed  between  two  or  several 
parties.  The  name  arises  from  a  custom  of  drawing  a  deed 
with  the  edge  indented  for  identification  and  greater  security. 
Blackstone  says:  "  If  a  deed  be  made  by  more  parties  than 
one,  there  ought  to  be  regularly  as  many  copies  of  it  as  there 
are  parties,  and  each  should  be  cut  or  indented  ...  on  the 
top  or  side,  to  tally  or  correspond  with  the  others;  which  deed, 
so  made,  is  called  an  indenture."  l 

Independent  Telephone  Companies.  See  "  Telephone  Securi- 
ties." 

ing  the  principal  for  others,  must  be  more  careful  to  distinguish  between 
real  income  and  increase  which  comes  from  an  increase  in  the  value  of  the 
property."  —  The  American  Law  Relating  to  Income  and  Principal. 
1  Blackstone's  Commentaries. 


MONEY    AND    INVESTMENTS  207 

India  Council  Bills.     See  "  Council  Drafts." 
India  Council  Drafts.    See  "  Council  Drafts." 
India,  Money  of.    See  "  Rupee." 
India  Rupee  Paper.    See  "  Rupee  Paper." 
Indirect   Exchange.      Same   process    as    explained    under 
"  Triangular  Operation." 

Individual  Deposits.  The  "  bank  statement  "  is  frequently 
tabulated  in  such  form  as  to  subdivide  the  deposits.  "  In- 
dividual deposits,"  therefore,  would  have  reference  to  all 
deposits  other  than  by  banks  and  trust  companies,  United 
States  Government,  or  from  the  banks'  agents.  It  would 
include  deposits  of  firms,  individuals,  corporations  in  general, 
private  bankers,  etc. 

Indorse.  The  person  to  whom  a  check,  note,  or  draft  is 
made  payable  is  called  the  "  payee."  If  the  payee  wishes  to 
make  the  check  (note  or  draft)  good  in  the  hands  of  some  one 
else,  he  writes  his  name  across  the  back  of  the  check,  in  ac- 
cordance with  the  wording  as  filled  in  upon  the  face.  This  is 
called  "  indorsing."  For  instance,  a  check  made  payable  to 
John  J.  Smith  upon  the  face,  should  be  signed  by  him  across 
the  back,  "  John  J.  Smith,"  not  "  John  Smith."  If  it  is  an 
error  and  his  name  should  really  be  John  Smith  without  the 
middle  letter  "  J,"  and  it  is  not  convenient  to  get  a  new  check 
issued  in  correct  form,  he  may  sign  his  correct  name  also 
under  "  John  J.  Smith,"  thus  signing  both,  although,  of 
course,  this  latter  method  may  not  be  asked  for  by  the  party 
about  to  receive  the  check.  He  should  demand  this,  for,  when 
he  in  turn  indorses  it,  he  guarantees  all  previous  indorsements 
and,  in  case  the  check  proves  worthless  and  recourse  is  taken 
against  John  Smith,  it  may  simplify  matters  that  Smith  be 
given  no  opportunity  to  set  up  the  defence  that  it  was  not 
his  legal  signature.  Again,  if  a  check  should  be  drawn  to 
Mrs.  John  Smith  she  should  indorse  it  that  way,  ancf  then 
under  it  her  legal  name,  Susan  Smith. 

If  a  check  is  presented  for  payment  and  there  is  no  money 
on  deposit  to  meet  the  same,  the  check  having  passed  through 
the  hands  of  several  different  people,  each  in  turn  indorsing 
it,  the  last  holder,  who  presents  it  to  the  bank  for  payment, 
may  fall  back  upon  any  previous  indorser  he  sees  fit.  It  is  not 
necessary  for  him  to  take  legal  action  against  the  last  signer, 
and  so  on  back  in  reverse  order  of  the  indorsements.  In  in- 
dorsing a  check  remember  that  unless  the  indorser  adds  the 
words  "  without  recourse  "  he  may  be  held  liable  for  the 
amount  of  the  check.  This,  as  set  forth  under  "  Without 
Recourse,"  does  not  imply  that  the  condition  may  be  generally 
made  use  of.  (See  that  subject,  as  well  as  "  Check.") 


208  MONEY    AND    INVESTMENTS 

All  that  is  said  above  in  regard  to  a  "  check  "  applies  with 
equal  force  to  notes,  and  all  such  papers  that  pass  by  "  in- 
dorsement." 

When  one  or  more  persons  "  indorse  "  a  note,  thus  becoming 
liable  for  its  payment,  in  the  case  of  failure  on  the  part  of  the 
"  maker  "  to  meet  it,  they  assume  liability  for  the  note  only 
as  originally  made  and  no  holder  can  recover  from  the  "  in- 
dorsers,"  provided  the  former  allows  any  change  in  the  note's 
original  terms.  For  instance,  suppose  a  note  falls  due  and 
the  holder  renews  it;  that  is  extends  the  time  of  payment 
without  permission  of  the  indorser;  by  this  act  the  latter 
would  be  relieved  of  all  liability.  A  holder  of  a  note  with 
indorsements  must  present  it  for  payment  upon  the  day  of 
its  maturity,  for  failure  so  to  do  relieves  the  indorsers  of  all 
liability.  Although  the  holder  of  a  note  may  have  received 
collaterals  from  the  maker,  he  is  under  no  obligation  to  pro- 
ceed on  the  collateral  before  suing  the  indorser. 

In  "  indorsing  "  a  check,  hold  it  face  upwards,  and  observe 
the  left-hand  end  as  it  then  lies;  turn  it  over  and  make  the 
"  indorsement  "  on  the  back  across  that  end.  This  is  not 
obligatory,  but  makes  it  much  more  convenient  for  the 
handling  by  bank  clerks,  and  others. 

In  indorsing  a  check,  note,  etc.,  making  it  payable  to  John 
Smith,  for  instance,  use  the  wording:  "  Pay  to  John  Smith." 
This  will  enable  John  Smith  to  again  "  indorse  "  it  and  pass 
it  on  from  hand  to  hand,  that  is,  make  it  negotiable. 

Occasion  sometimes  arises  when  one  person  wishes  to 
deposit  a  check  to  the  credit  of  another,  the  check  being 
payable  to  the  latter,  but  it  not  being  convenient  to  get  his 
indorsement.  To  illustrate:  A  banking  house  —  James 
Crow  &  Co.  —  may  wish  to  pay  Paul  Jones  $1,000  on  account 
of  collections  made,  or  for  other  reasons.  Instead  of  sending 
the  check  to  Paul  Jones,  they  may  have  received  instructions 
to  dep'osit  it  in  his  bank  to  his  credit.  The  question  is,  how 
to  "  indorse  "  the  check  for  him  so  that  the  bank  will  accept 
it  without  his  personal  indorsement.  The  following  is  a  com- 
plete wording  that  banks  may  require:  "  Pay  to  the  order  of 

Bank,  for  the  credit  of  Paul  Jones,  by  James  Crow  & 

Co.,  Attorney."  In  practice,  however,  banks  usually  take 
checks  with  the  simple  indorsement,  "  Paul  Jones,  by  James 
Crow  &  Co.,"  but  the  former  is  technically  correct;  and,  in 
such  a  case,  the  bank  does  not  require  that  James  Crow  &  Co. 
shall  hold  the  actual  power  of  attorney  for  indorsement,  but 
they  accept  them  as  attorneys  for  the  occasion  without  any 
evidence  of  authority,  but  this  is  done  at  the  risk  of  the  bank. 

On  any  checks  issued  by  the  United  States  Treasury  at 
Washington,  the  last  indorsement,  that  is,  the  indorsement  of 
the  one  presenting  for  collection,  must  be  in  hand-writing,  as 


MONEY    AND    INVESTMENTS  209 

a  stamped  indorsement,  such  as  is  frequently  used,  is  not  then 
permissible. 

An  indorsement  in  law  is  considered  a  written  contract,  the 
terms  of  which,  though  commonly  omitted  for  the  sake  of 
convenience,  are,  nevertheless,  definite  and  fixed;  none  the 
less  understood  because  not  expressed  in  words.  Although 
this  is  almost  a  universal  rule,  there  are  a  few  States  which 
regard  the  signature  of  an  indorser  simply  as  evidence  of  his 
having  entered  into  a  contract,  and  will  accept  testimony  as 
to  any  verbal  agreements  which  may  modify  the  implied 
contract.1 

Indorsed  Bonds.  The  New  York  Stock  Exchange  rules  pro- 
vide that  "  Coupon  Bonds  issued  to  Bearer,  having  an  in- 
dorsement upon  them  not  properly  pertaining  to  them  as  a 
security,  must  be  sold  specifically  as  '  Indorsed  Bonds/  and 
are  not  a  delivery,  except  as  '  Indorsed  Bonds.'  ' 

An  example  of  a  bond  which  comes  under  this  heading  is 
one  upon  which  some  person's  name  has  been  indelibly  writ- 
ten. 

An  instance  is  related  of  the  treasurer  of  a  savings  institu- 
tion who,  in  his  spare  moments,  wrote  across  each  of  their 
bonds  words  to  the  effect  that  it  was  the  property  of  the 
institution  in  question.  In  making  a  sale,  through  a  stock 
exchange  member,  of  bonds  of  a  New  England  railroad,  being 
part  of  an  issue  seldom  traded  in,  and  consequently  offered 
at  very  infrequent  intervals  upon  the  market,  the  treasurer 
of  this  institution  found  himself  in  trouble  when  he  came  to 
make  delivery,  as  the  broker  would  not  accept  bonds  with 
the  institution's  name  indorsed  upon  them.  The  natural 
course  would  have  been  to  purchase  other  like  bonds  in  the 
open  market  in  order  to  make  the  delivery  good,  the  loss, 
if  any,  in  the  transaction,  to  be  borne  by  the  institution.  In 
this  case,  however,  the  bonds  were  of  such  a  rare  issue  that 
this  was  impossible  and  a  compromise  had  to  be  effected  with 
the  purchasing  party  by  selling  the  bonds  at  a  lesser  price 
as  "  indorsed  bonds." 

In  reply  to  the  query  why  the  railroad  company  would  not 
issue  new  securities  in  their  place,  it  may  be  said  from  the 
standpoint  of  the  company  that  the  bonds  were  perfectly 
good.  They  might  have  been  converted  into  "  registered 
bonds  "  if  privilege  of  registration  had  existed.  The  broker 
might  not  have  accepted  registered  bonds,  however. 

It  is  a  safe  plan  never  to  deface  a  security  in  any  way.    If 

1  Those  desiring  to  follow  this  subject  further  may  refer  to  "  Joint  In- 
dorsemement,"  "  Absolute  Indorsement,"  "  Conditional  Indorsement," 
"Restrictive  Indorsement,"  "Indorsement  in  Full,"  "Indorsement  in 
Blank,"  "  Qualified  Indorsement,"  "Joint  Indorsement,"  "  Without  Re- 
course," and  "Protest." 


210  MONEY    AND    INVESTMENTS 

any  memorandum  or  other  writing  is  necessary,  write  it  on 
a  separate  piece  of  paper  and  attach  it  to  the  security. 

Indorsed  Paper.     See  "  Two-name  Paper." 

Indorsee.  The  party  indorsing  a  paper,  by  such  act,  must 
assign  or  transfer  certain  rights  therein  to  another  called  the 
"  indorsee,"  i.  e.  the  person  to  whom  a  check,  note,  etc.,  is 
indorsed,  or  made  payable  by  assignment;  the  one  who 
acquires  the  rights  conveyed  by  the  indorsing  of  any  negoti- 
able instrument.  If  a  check  is  made  payable  to  Henry  Poor, 
and  he  writes  across  the  back,  "  Pay  to  the  order  of  Paul 
Jones,"  and  then  signs  his  own  name  below,  Paul  Jones  acquires 
the  right  to  collect  the  check  and  becomes  the  "  indorsee." 

Indorse  for  Deposit.  Supposing  the  reader  to  have  already 
familiarized  himself  with  the  matter  under  "  Indorse,"  it  is 
only  necessary  to  add  here  the  simple  bank  rules  for  indorsing 
checks,  etc.,  for  deposit.  The  simplest  form  is:  "  Pay  to  the 
Fisherman's  National  Bank  or  order  "  for  example;  and  then 
the  depositor  signs  his  name  immediately  below.  (The 
reader's  attention  is  particularly  called  to  the  next  to  the  last 
paragraph  under  "  Indorse.") 

Indorsement.  The  indorsees  act  of  writing,  or  the  writing 
itself.  (See  "  Indorser.") 

Indorsement  in  Blank.  An  instrument  with  simply  the 
name  of  the  indorser  written  upon  its  back.  This  makes  it 
good  in  the  hands  of  any  legitimate  holder.  The  holder  of 
such  a  paper  may  make  it  payable  to  himself  or  to  whomso- 
ever he  chooses  by  writing  the  name  directly  above  the  in- 
dorsement. 

Indorsement  in  Full.  An  instrument  with  not  only  the 
name  of  the  indorser  written  upon  its  back,  but  following 
directly  under  the  name  of  the  party  to  whom  it  is  indorsed 
for  payment. 

Indorser.  A  person  who  indorses  a  check,  note,  etc.;  that 
is,  writes  his  name  across  the  back  and  by  this  act  becomes 
liable  for  its  payment.  (See  "  Without  Recourse,"  and 
"  Indorse.") 

Indorser  for  Value.  The  opposite  to  an  "  accommodation 
indorser  "  (see  "  Accommodation  Paper  ");  one  who  receives 
consideration  for  his  indorsement. 

Industrial  Insurance.  This  differs  in  no  essential  particular 
from  the  ordinary  life  insurance.  It  consists  of  insurance  for 
small  amounts  among  those  who  cannot,  or  do  not  wish  to, 
afford  so  large  a  policy  as,  say  $1,000,  and  who  prefer  to  pay 
the  premium  weekly  in  small  sums.  This  method  of  insurance 
is  expensive  —  the  cost  being  nearly  double  that  of  the 
ordinary  kind  —  and  is  open  to  the  criticism,  by  many,  of 


MONEY    AND    INVESTMENTS  211 

encouraging  the  placing  of  insurance  upon  the  lives  of  chil- 
dren and  infants,  which,  among  the  very  poor,  especially,  is 
obviously  objectionable.  At  the  same  time,  it  is  not  fair  to 
condemn  in  its  entirety  this  form  of  insurance,  for  there  must 
be  many  cases  where  a  burial  fund  is  provided,  which  is  of 
great  help  and  comfort  to  the  parents. 

Industrials.     See  "  Industrial  Securities." 

Industrial  Securities.  Securities  issued  by  manufacturing 
companies.  There  has,  perhaps,  been  no  class  of  securities 
which  has  attracted  greater  attention  the  last  few  years  than 
"  industrials,"  so-called,  and  there  is  no  class,  perhaps,  less 
established  in  the  minds  of  the  public  as  to  its  permanent 
value,  as  is  evidenced  by  the  fact  that  stocks  and  bonds  of 
such  corporations  can  be  purchased  at  prices  to  pay  very 
large  returns  upon  the  money.  One  of  the  largest  of  the 
"  industrials  "  is  the  United  States  Steel  Corporation,  whose 
securities  at  this  moment  of  writing  —  April  6,  1907  —  even 
with  the  tremendous  earnings  which  the  property  enjoys,  are 
selling  as  follows: 

5%  bonds  selling  at  99,  paying  the  investor  5%-f-. 

7%  preferred  stock  selling  at  101,  paying  the  investor  7% — . 

The  larger  "  industrials  "  result  from  the  consolidation  of 
several  concerns  which  had  previously  been  in  the  same  line 
of  manufacturing;  theoretically,  so  that  the  business  of  the 
whole  may  be  administered  to  the  best  advantage  of  all; 
deliverance  from  competitive  sacrifices,  with  the  large  profits 
which  concentrated  management  assures.  Bonds  have  not 
as  yet  been  issued  upon  "  industrial  "  properties,  in  propor- 
tion to  their  total  valuation,to  such  an  extent  as  upon  railways. 
This,  perhaps,  arises  from  the  uncertainty  as  to  the  foreclosure 
value  of  an  "  industrial  "  property.  There  is  no  great  value 
attached  to  such  a  plant  for  right  of  way  or  for  franchise,  as 
in  the  case  of  a  railway,  nor  do  such  plants,  as  a  rule,  occupy 
strategic  positions  which  give  them  great  added  value.  The 
value  of  these  concerns  depends  very  largely  upon  their 
successful  conduct,  and,  in  case  of  the  sale  at  foreclosure  of  a 
manufacturing  plant,  it  frequently  brings  but  a  small  price 
because  its  buildings  and  machinery  have  a  comparatively 
low  value  unless  in  successful  operation. 

The  assets  of  the  new  "  industrials,"  against  which  stocks 
and  bonds  may  be  issued,  should  be  carefully  considered. 
The  plant  and  machinery  may  be  almost  valueless  for  any 
other  purpose.  Good-will  and  patents  are  also  often  reckoned 
as  assets,  but  such  have  very  little  value  except  so  long  as  the 
corporation  is  prosperous.  The  good-will  of  a  bankrupt  com- 
pany would  sell  for  but  very  little  money  at  foreclosure.  One 


212  MONEY    AND    INVESTMENTS 

corporation  has  eliminated  the  good-will  from  its  accounts, 
thereby  reducing  its  total  assets  about  $5,000,000.  (See 
"  Good-will.") 

The  "  industrials  "  are  very  largely  speculative  investments, 
and  until  they  have  been  through  a  long  period  of  business 
depression,  as  have  already  our  railroads,  it  will  be  impossible 
to  determine  their  permanent  investment  value.  They  yield 
more  than  railroad  securities  as  the  risk  is  greater.  The  hard 
times  of  the  middle  "  nineties  "  resulted  in  a  large  percentage 
of  the  railway  mileage  of  this  country  going  into  the  hands  of 
receivers  and  through  a  process  of  reorganization,  which,  in 
most  cases,  was  radical  enough,  when  followed  by  the  period 
of  expansion  and  industrial  activity,  to  place  them  upon  a 
permanent  footing.  The  "  industrials  "  must,  therefore, 
sooner  or  later  go  through  a  similar  period  before  the  necessity 
of  reorganization  can  be  ascertained.  Those  that  weather  such 
storms  in  financial  safety  may  then,  as  a  class,  be  selected  as 
good  investments  and  should,  after  such  a  period,  sell  at 
prices  commensurate  with  that  belief. 

It  will  be  seen  that  the  real  value  of  an  "  industrial  "  very 
largely  depends  upon  the  permanent  successful  conduct  of  its 
business  and  a  definite  understanding  of  its  earning  capacity. 
The  class  of  commodities  produced  deserves  serious  considera- 
tion; that  is,  the  value  of  such  a  product  to  the  community 
at  large  and  the  necessity  for  the  continued  operation  of  the 
plant,  and  to  what  extent,  either  through  control  of  raw 
materials,  or  otherwise,  the  company  can  control  its  particular 
line  of  business. 

To  go  into  the  matter  further  requires  a  knowledge  of 
whether  or  no  a  reduction  of  expenses  has  been  accom- 
plished by  consolidation,  and  an  increase  of  earnings  effected 
for  a  like  reason.  Is  the  company  carrying  a  "  floating  in- 
debtedness; "  and,  if  so,  the  reason  therefor?  Are  proper 
charges  being  made  for  depreciation  and  altogether  a  con- 
servative system  of  bookkeeping  being  pursued  so  that  the 
dividends  are  warranted?  It  is  very  easy  to  be  misled  by  the 
manner  in  which  the  books  of  any  corporation  are  kept,  but 
the  keeping  of  the  books  of  an  industrial  concern  offers  especial 
opportunities  for  deceiving  the  public.  Corporations  of  this 
kind  should  not,  on  the  average,  from  year  to  year,  divide 
among  their  stockholders  more  than  about  one  half  the  net 
earnings;  the  balance  going  into  permanent  improvements, 
or  reserved  as  surplus. 

The  dividend  record  should  be  studied  for  as  far  back  as 
possible.  A  good  record  in  this  way  is  an  argument  in  favour 
of  bond  security.  In  considering  stocks  beware  of  "  over- 
capitalization." 

The  fact,  also,  that  orders  are  in  hand  for  the  full  capacity 


MONEY    AND    INVESTMENTS  213 

of  the  plant  for  months  ahead  should  not  be  given  too  serious 
consideration,  for  past  experience  has  shown  that  in  times  of 
sudden  widespread  financial  and  business  disaster,  consumers 
have  had  no  scruples  about  cancelling  contracts,  and  it  has 
not  in  the  past  proved  worth  the  while  to  try  to  enforce  the 
same  to  any  great  extent. 

The  preferred  stock  in  "  industrials  "  has  usually  equalled 
the  value  of  the  property  above  the  bonds,  if  any,  plus  the 
necessary  working  capital,  leaving  the  common  stock  to  obtain 
its  value  from  economies  in  operation  expected  to  result  from 
centralized  management. 

For  many  reasons  "  industrial  "  shares  and  bonds  are  more 
subject  to  manipulating  than  most  railway  securities. 

The  enormous  capitalization  of  some  of  the  corporations  is 
often  lost  sight  of  in  considering  the  earnings.  That  is  to  say, 
what  at  first  thought  may  seem  enormous  profits  and  argue 
remarkable  financial  prosperity,  may  not,  on  more  careful 
investigation,  seem  so  large  when  the  percentage  of  such 
earnings  to  the  total  capitalization  is  taken  into  consideration. 

The  magnitude  of  the  industrial  capitalization  may  be 
appreciated  from  a  recent  tabulation  showing  that  43%  of 
the  capital  listed  on  the  New  York  Stock  Exchange  is  "  in- 
dustrial securities,"  the  latter  amounting  to  $4,002,000,000, 
as  against  railroads,  $5,300,000,000.* 

In  Exchange.    See  "  Payable  in  Exchange." 

Inflate.  Prices  are  "  inflated  "  when  securities  are  selling 
for  much  more  than  they  are  intrinsically  worth.  To  "  inflate: " 
to  swell  up;  to  puff  up  with  gas  like  a  balloon;  there  is  no 
solid  substance  inside  and  when  the  gas  is  let  out  the  thing 
will  collapse.  The  same  practical  end  is  apt  to  result  from  an 
"  inflated  "  market. 

In  Funds.    Having  money  for  the  purpose  required. 

Inheritance  Tax.  A  State  tax  imposed  upon  property  in- 
herited, not  a  tax  collectible  from  year  to  year  like  city  taxes, 
but  collectible  only  once  —  at  the  time  of  the  inheritance  of 
the  property  —  and  payable  to  the  State  only. 

In  those  States  which  have  established  an  "  inheritance 
tax,"  executors  and  administrators  should,  upon  assuming 
the  duties  of  their  office,  look  into  this  matter  immediately, 
and  the  statutes  should  be  carefully  studied  or  competent 
legal  advice  taken  regarding  the  matter.  Taxes  of  this 
nature  are  of  two  kinds:  the  "  direct  inheritance  "  and  the 
"  collateral  inheritance  tax." 

The  first  is  a  tax  upon  property  descending  directly  to  a 
child  or  other  lineal  descendant  or  to  very  near  relations,  such 
as  a  mother,  father,  husband,  brother,  or  wife. 
1  Boston  Herald,  October  23,  1906. 


214  MONEY    AND    INVESTMENTS 

The  second  taxes  all  inheritances  other  than  those  above. 

The  "  collateral  inheritance  tax  "  is  in  force  in  most  of  our 
States,  and  the  "  direct  inheritance  tax  "  is  in  force  in  England 
and  is  being  rapidly  adopted  in  this  country. 

In  most  cases,  legacies  to  charitable,  educational,  or  re- 
ligious institutions  within  the  State  imposing  the  tax  are 
exempted.  This  tax  is  usually  a  graduated  one,  increasing 
with  the  amount  of  property  inherited  and  with  the  distance 
in  relationship. 

The  foregoing  must  not  be  taken  as  the  actual  law  of  any 
State,  but  only  an  example  of  the  general  intent  of  such 
laws. 

Inland  Exchange.    See  "  Exchange." 

Inner  Belt.    See  "  Belt  Lines." 

Inside  Broker.  See  "  London  Stock  Exchange  Transac- 
tions." 

Insider.  Perhaps  a  good  definition  of  the  word  "  insider  " 
may  be  obtained  by  reading  the  subject  matter  under  the 
heading  "  Fleece."  The  "  insiders  "  are  those  who  have 
knowledge  of  the  financial  and  business  affairs  of  a  corpora- 
tion, or  of  any  enterprise,  and  are  in  a  position,  therefore,  to 
act  in  an  intelligent  manner  regarding  the  securities  of  such 
corporation.  Another,  perhaps  very  common  meaning  of 
"  insider,"  is  one  who  participates  in  the  financial  scheme,  or 
plan,  of  an  issue  of  securities,  and,  as  a  consequence,  obtains 
special  profits  not  obtainable  by  others. 

Inside  Tip.  Information  given  in  a  secretive  way  by  one 
having  to  do  with  the  control  or  management  of  a  corpora- 
tion, purporting  to  show  the  true  condition  of  the  securities 
of  the  concern  in  question. 

In  Sight.  Grain,  coffee,  cotton,  or  any  commodity  available 
for  immediate  use. 

Insolvency.  The  inability  to  pay  one's  debts  as  they  become 
due. 

Insolvent.  One  is  insolvent  when  he  has  not  sufficient 
money  or  property  to  pay  all  debts. 

Inspector  of  Finance.     Same  as  Bank  Commissioner. 

Inst.     Instalment. 

Instalment.  Securities  are  often  sold  conditionally  upon 
certain  proportion  of  the  purchase  price  being  paid  at  the  time 
of  purchase,  and  the  balance  being  made  payable  in  certain 
amounts  at  stated  intervals,  until  the  full  amount  is  paid. 
Such  payments  are  called  "  instalments." 

Insufficient  Fluids.  When  stamped  upon  a  check  returned 
from  the  bank  at  which  it  is  payable  it  indicates  that  the 


MONEY    AND    INVESTMENTS  215 

"  drawer  "  has  some  but  not  sufficient  money  to  his  credit 
to  meet  its  payment. 

Int.     Short  for  "  interest." 

Interborough.  Interborough  Rapid  Transit  Co.  (Subway 
System  of  New  York  City.) 

Intercepting  Sewer  Bonds.  In  some  cities  where  the  cost  of 
the  sewers  is  borne  by  the  owners  of  the  abutting  property 
especially  benefited  by  each  particular  sewer,  there  is  a  certain 
proportion  of  the  whole  system  for  which  it  is  deemed  proper 
that  the  municipality  at  large  should  be  responsible,  and,  in 
such  cases,  the  town  or  city  itself  may  issue  bonds  for  such  a 
purpose  bearing  the  above  title. 

Interchangeable  Bonds.  After  understanding  the  difference 
between  a  "  registered  "  and  a  "  coupon  bond  "  by  referring 
to  those  subjects,  it  will  be  clear  that  "  interchangeable  bonds  " 
are  those  which  are  changeable  from  "  coupon  "  to  "  regis- 
tered," and  back  again  from  "  registered  "  to  "  coupon,"  at 
the  request  of  the  holder.  Many  issues,  the  bonds  of  which 
have  once  been  converted  into  a  registered  form,  may  not 
again  be  issued  as  "  coupon  bonds." 

Interest.  The  charge  made  and  which  the  borrower  pays 
for  the  use  of  money,1  usually  expressed  in  percentage  based 
on  a  year,  i.  e.  if  $3  is  paid  for  the  use  of  $100  for  six 
months,  it  is  an  equivalent  to  $6  for  one  year,  and  is  ex- 
pressed as  "  6  per  cent.,"  or  "6%."  Money,  like  any  other 
commodity,  has  a  value  and  payment  must  be  made  for  its 
rental,  or  use. 

The  matter  of  figuring  interest  is  an  arithmetical  one  hardly 
necessary  to  treat  of  here,  but  there  are  several  methods  of 
computing  the  time  for  which  interest  is  figured,  which  it  is 
well  to  understand. 

First,  the  New  York  Method,  which  is  undoubtedly  the 
correct  one.  The  time  is  computed  by  taking  the  actual 
number  of  days  elapsed;  that  is,  suppose  a  note  to  be  dated 
March  1st;  the  interest  on  the  same  to  be  computed  to  July 
7th;  there  would  be  31  days  in  March,  30  days  in  April,  31 
days  in  May,  30  days  in  June  and  6  days  in  July,  a  total  of 
128  days.  After  obtaining  this  result,  an  interest  table  is  used 
based  on  there  being  365  days  in  the  year;  or,  in  other  words, 
the  yearly  interest  rate  divided  by  365  gives  the  rate  for  one 
day.  Now  this  differs  from  the  Boston  Method  (as  it  is  termed 
in  that  city)  which  calls  for  the  use  of  an  interest  table  based 
on  there  being  but  360  days  in  the  year,  from  the  fact  that  the 
time  elapsed  is  computed  as  so  many  months  and  days,  each 
and  every  month  being  accepted  as  30  days;  12  times 

1  For  the  purpose  of  this  definition  it  is  not  necessary  to  distinguish 
between  capital  and  money. 


216  MONEY    AND    INVESTMENTS 

30  equalling  360.  One  month,  therefore,  is  figured  as* 
1-12  the  yearly  rate.  Supposing  this  to  be  6%;  then 
the  interest  for  one  month  would  be  ^  of  1%.  From  July 
5th  to  September  7th  would  be  reckoned  as  2  months  and 
2  days. 

The  difference  between  the  New  York  and  Boston  methods 
may  be  shown  in  a  practical  way  by  computing  the  in- 
terest on,  say,  $100  for  6  months  at  6%  per  annum. 
By  the  former  method,  supposing  the  months  to  be  August 
to  January  inclusive,  the  elapsed  time  would  be  184  days, 
and  the  result  $3.025.  But  by  the  Boston  method,  which 
would  reckon  the  elapsed  time  as  6  months,  irrespective  of 
what  months,  the  result  would  be  $3.  Again  supposing 
the  months  to  be  January  to  June  inclusive,  and  the  year  not 
a  "  leap  year,"  then  the  elapsed  time  would  be  181  days  or 
1£  days  less  than  one  half  a  year  by  the  New  York  method, 
but  a  full  half  year  by  the  Boston  method. 

There  is  a  third  plan  which  has  not  been  as  yet  definitely 
named,  and  is  not  in  general  use.  A  sort  of  combination  of 
the  two  foregoing.  The  actual  time  elapsed  is  computed  by 
the  New  York  method,  the  number  of  days  obtained  divided 
by  30,  and  the  360-day  table,  as  called  for  in  the  Boston 
method,  used. 

The  different  methods  of  computing  interest  on  bonds,1 
notes,  and  other  securities,  will  often  account  for  a  vari- 
ation on  the  part  of  two  different  people  figuring  the  same 
transaction  in  accordance  witn  the  customs  in  the  two  dif- 
ferent cities  in  which  the  figures  are  computed. 

It  is  worthy  of  note  that  not  until  the  year  1546  was  the 
taking  of  interest  for  the  use  of  money  legalized  in  England. 
The  rate  was  fixed  at  10%. 

Another  use  for  the  word  "  interest  "  is  in  connection  with 
one's  ownership  in  a  property.  Again,  for  the  speculative 
side  of  the  market,  such  as  the  "  long  "  interest,  meaning  those 
long  of  stock,  as  explained  under  "  Long." 

Remember  these  facts:  midnight  ends  the  legal  day,  and 
any  loan  of  money  through  the  midnight  hour  calls  for  one 
day's  interest;  for  illustration,  a  loan  at  5  P.  M.  on  July  5th 
and  repaid  early  in  the  morning  on  July  6th,  would  be  reck- 
oned as  one  day.  This  will  also  make  clear  that  in  computing 
the  number  of  days  for  which  interest  runs,  the  day  on  which 
the  loan  is  made  is  not  included  in  the  computation.  From 
July  7th  to  July  14th  is  seven  days,  because  seven  midnights 
have  passed.  July  7th  is  not  included  in  the  reckoning;  other- 
wise it  would  be  eight  days. 

1  In  such  a  case  as  a  bond  or  other  indebtedness  having  fixed  maturity 
date  of  coupons,  the  Boston  method  is  the  more  correct. 


MONEY    AND      INVESTMENTS  217 

Interest  Accrued.     See  "  Accrued  Interest." 

Interest  Added.     See  "  Accrued  Interest." 

Interest-Bearing.     Securities  which  bear  interest. 

Interest  on  Daily  Balances.     See  "  Daily  Balances." 

Interest  Payable  Annually.     See  "  Annual  Interest." 

Interest  Payable  Quarterly.     See  "  Quarterly  Interest." 

Interest  Payable  Semi-Annually.  See  "  Semi- Annual  In- 
terest." 

Interest  to  Follow.  Payable  at  maturity.  A  most  common 
use  of  this  term  is  in  connection  with  money  borrowed  for  a 
comparatively  short  time,  generally  not  exceeding  six  months. 
Suppose,  for  example,  that  A  borrows  $10,000  of  B  at  5%, 
"  interest  to  follow,"  the  note  payable  six  months  from  its 
date.  It  would  mean  that  B  would  not  receive  interest  on 
the  loan  until  the  expiration  of  the  six  months.  (See  "  Dis- 
count.") 

Interest  Warrant.  See  next  to  last  paragraph  of  "  War- 
rant." 

Interim  Certificate.  A  temporary  certificate  issued  to  the 
purchaser  of  a  given  security  until  the  properly  engraved, 
lithographed  or  printed  security  can  be  issued  to  take  its 
place.  They  are  often  issued  by  the  corporation  itself  but 
more  frequently  by  some  trust  company. 

Interior  Banks.  Probably  a  correct  definition  of  "  interior 
banks  "  is:  all  banks  of  this  country  located  without  the  City 
of  New  York.  That  there  is  some  hesitation  on  the  part  of 
those  best  posted  on  such  matters,  is  evidenced  by  this  quota- 
tation  from  a  letter  bearing  upon  the  subject  from  Mr.  F.  A. 
Vanderlip:  "  The  term  is,  of  course,  very  evidently  not  a 
well-considered  one,  and  it  may  seem  a  little  incongruous  to 
suggest  that  a  bank  located  on  the  New  England  seaboard 
should  be  called  an  '  interior  bank.'  It  seems  to  me  the  term 
is  understood  in  financial  circles  to  mean  those  banks  which 
treat  New  York  as  a  '  reserve  centre,'  and  that  necessarily 
includes  all  other  banks  of  the  country.  The  banks  of  the 
other  two  '  central  reserve  cities  '  are  really  '  interior  banks  ' 
in  this  sense  also." 

Interior  Cotton  Receipts.  The  weekly  gross  receipts  of 
cotton  at  the  principal  interior  cities,  such  as  Houston, 
Tex.,  Memphis,  Tenn.,  Augusta,  Ga.,  St.  Louis,  Mo.,  Cin- 
cinnati, O.,  etc. 

Internal  Loan.  An  issue  of  bonds  placed  among  investors 
in  the  country  by  which  issued. 

International  Checks.  These  are  for  the  convenience  of 
travellers  who  desire  something  more  in  the  nature  of  actual 
bank  notes  than  "  letters  of  credit."  They  are  issued  in  sums 


218  MONEY    AND    INVESTMENTS 

of  £5,  £10  and  £20; *  identify  the  holder  by  his  signature; 
are  accepted  by  the  agents  of  the  issuing  banker  without 
regard  to  the  rate  of  exchange,  the  check  stating  on  its  face 
its  value  in  the  currencies  of  the  important  countries  of 
Europe.  In  case  of  loss  the  check  is  of  no  value  to  other  than 
the  person  in  whose  name  issued.  The  charge  made  for  these 
is  about  £%  of  the  face  value. 

International  Exchange.     See  "  Exchange." 

International  Movement  of  Gold.  This  is  too  intricate  and 
complex  a  subject  of  which  to  attempt  an  exhaustive  ex- 
planation within  the  necessary  limitations  of  this  work.  Some 
of  the  more  important  influences  which  have  a  direct  bearing 
upon  the  exports  and  imports  of  the  yellow  metal,  so  that 
some  general  idea  may  be  had  as  to  the  causes  for  its  move- 
ment, will  be  given.  A  knowledge  of  the  principles  of  foreign 
exchange  (see  "  Exchange  ")  is  necessary  to  an  understanding 
of  the  gold  movement,  for  one  is  very  closely  related  to  the 
other. 

In  the  first  place,  the  actual  transportation  of  the  metal 
is  accomplished  in  this  way:  Specie  in  general  is  almost 
always  shipped  on  a  through  bill  of  lading  to  London  —  the 
principal  world's  market  for  gold  —  and  consists  either  of 
small  bars  of  gold  packed  in  kegs,  or  gold  coin  in  similar 
packages.  The  present  rate  of  freight  from  New  York  to 
London  is  {%  on  silver,  and  5-32%  on  gold.  The  insurance 
would  be  placed  by  the  shipper  with  any  of  the  large  insurance 
companies,  whose  current  rate  is  l-20th  of  1%.  At  such  times 
gold  is  not  valued  as  coin  but  as  bullion.  As  coin  itself  is 
subject  to  abrasion  and,  consequently,  light  weight,  the 
shipper  prefers  bullion.  This  may  be  obtained  in  bars  from 
the  "  Assay  Office  "  at  a  small  premium,  and  packed  in  saw- 
dust to  prevent  abrasion.  It  now  becomes  a  mere  commodity 
and  the  premium,  packing,  cartage,  expressage,  loss  of  interest 
on  the  money  involved  during  transit,  and  insurance,  must  all 
be  added  to  the  cost.2 

1  Express  companies  have  made  a  specialty  of  issuing  "  travellers' 
checks  "  in  denominations  of  $10  and  upwards.  These  have  become  so  well 
known  that  they  are  accepted  by  steamship  companies,  hotels,  etc.,  as 
readily  as  actual  money.  These  are  of  great  service  here  in  this  country, 
and  are  in  constant  use  among  commercial  travellers. 

2  Between  London  and  New  York  this  is  estimated  at  about  3-8  %,  or  a 
little  less  than  2  cents  per  pound  sterling. 

The  Secretary  of  the  Treasury,  in  1906,  established  the  precedent  of 
increasing  the  Government's  deposits  in  banks  (see  "  United  States  De- 
pository ")  to  the  amount  which  they  have  engaged  gold  for  import 
(covered  not  by  deposits  of  United  States  Government  bonds,  but  by  what 
are  known  as  "  savings  bank  bonds  "  —  permissible  for  the  investment 
of  funds  of  Massachusetts  or  New  York  savings  banks  —  accepting  them 
at  90%  of  their  face  value)  as  soon  as  the  engagements  have  been  made. 


MONEY    AND    INVESTMENTS  219 

With  the  above  facts  in  hand  it  is  easy  for  the  exporter  to 
figure  into  the  transaction  the  price  obtainable  abroad  and 
thus  determine  whether  or  no  he  can  ship  at  a  profit. 

In  the  next  place,  why  is  gold  shipped?  The  common 
belief  that  it  is  to  settle  the  balance  between  countries  arising 
from  exchange  of  commodities  between  them  is  only  partly 
true.  There  is  more  than  this  so-called  "  balance  of  trade  " 
entering  into  the  matter.  Take  our  own  country,  for  instance: 
We  must  settle  with  foreigners  for  not  only  the  commodities 
imported  1  but  for  earnings  on  foreign  capital  invested  here  as 
well  as  liquidation  of  the  principal;  for  the  expenses  incurred 
by  Americans  travelling  in  foreign  lands;  for  foreign  securities 
sold  in  American  markets;  remittances  sent  home  by  immi- 
grants; and  for  transportation  of  American  freight  in  vessels 
sailing  under  flags  of  other  nations.  The  opposite  side  of  the 
account  is  the  money  which  immigrants  bring  in;  payment 
for  our  exports;  expenditures  by  foreign  ships  when  in 
our  harbours;  charges  of  American  vessels  for  carrying 
foreign  merchandise;  travelling  expenses  incurred  in  this 
country  by  tourists  from  abroad;  investments  in  United 
States  by  foreigners,  and  interest,  dividends  and  principal 
payments  on  such  of  their  securities  as  are  owned  by  ourselves. 

Once  in  so  often  a  balance  of  all  these  accounts  must  neces- 
sarily be  struck,  and  gold  shipped  by  the  debtor  to  the  creditor 
nation.  But  a  settlement  in  this  way  may  be  postponed  be- 
yond its  natural  time.  Gold  shipments  are  regulated  by  the 
rates  of  exchange,  which,  in  turn,  are  affected  by  the  rates  for 
money.  Since  we  are  now  so  closely  connected  in  monetary 
matters,  one  nation  with  another,  each  will  take  advantage 
of  higher  interest  rates  prevailing  in  the  other  and  lend  its 
money  there.  The  rate  of  exchange,  which  may  have  been  at 

This  changes  the  "  gold  import  point,"  for  not  only  the  loss  of  interest  in 
transit  need  not  be  considered,  but  an  immediate  use  of  the  money  may  be 
obtained;  thus  the  interest  thereon  may  also  be  deducted  from  the  cost  of 
importation.  This  leaves  the  cost  of  packing,  cartage,  insurance  and 
freight,  and  the  cost  of  the  metal,  less  the  item  of  interest,  as  the  only  things 
to  be  considered. 

This  "  facilitating  process,"  as  it  is  called,  is  of  vast  importance  to  the 
United  States,  as  it  practically  eliminates  geography  from  the  question. 
Gold  in  almost  any  part  of  the  world  can  be  readily  made  available  in  this 
market,  and  it  is  bound  to  increase  the  importance  of  New  York  as  a  mone- 
tary centre;  in  addition  to  which,  it  would  have  a  tendency  to  maintain 
more  equable  rates  of  interest. 

The  action  of  the  Secretary  above  referred  to,  indicates  the  strong  call 
which  the  United  States  made  for  gold  during  1906.  This  was  partly 
brought  about  by  the  San  Francisco  disaster,  and  the  fact  that  the  New 
York  trust  companies  were  called  upon  to  keep  cash  reserves  for  the  first 
time.  The  London  Statist  estimates  that  we  absorbed  one-half  the  world's 
output  of  gold  for  the  year  1906. 

1  On  account  of  probable  undervaluation  of  imports,  published  statis- 
tics are  likely  not  to  be  exact. 


220  MONEY    AND    INVESTMENTS 

a  point  where  gold  shipments  were  likely  to  occur,  will  be 
suddenly  changed  by  the  creditor  nation  lending  its  balances 
at  the  prevailing  rate  in  preference  to  calling  its  funds  home. 
This  will  reduce  the  rate  of  exchange.  Just  as  soon  as  the 
rates  for  money  decline  exchange  will  go  up. 

A  shipment  of  gold  has  a  natural  tendency  to  strengthen 
money  rates,  and  is,  therefore,  always  dreaded  by  Wall  and 
State  Streets.  The  reverse  brings  lower  rates  and  ease  of 
mind. 

Unless  there  is  some  such  influence  at  work  as  the  above, 
it  is  obvious  that  the  rate  of  exchange  may  advance  until  the 
shipment  of  bullion  is  more  advantageous  and  gold  exports 
follow. 

Then  there  is  the  complex  system  of  one  country  paying 
its  debts  to  another  through  the  medium  of  a  third.  Gold 
was  shipped  from  Australia  to  pay  for  food  stuffs  purchased 
in  Argentina  for  the  English  soldiers  in  the  Boer  war.  The 
Sydney  Mint  now  sends  much  gold  to  San  Francisco  in  pay- 
ment for  American  products  shipped  to  Europe. 

Great  efforts  are  at  times  made  to  attract  imports.  It  is 
not  uncommon  for  Germany,  for  example,  to  mark  up  dis- 
counts as  a  bid  for  gold,  or  the  Bank  of  England  to  pursue 
the  same  tactics  to  prevent  its  export. 

The  Bank  of  France,  however,  has  another  method,  namely, 
that  of  purchasing  gold  on  its  own  account  and  charging  ex- 
porters a  premium  for  the  same.  This  plan  necessitates  less 
frequent  changing  of  the  discount  rate. 

It  is  usual  to  expect  Europe  to  ship  us  gold  in  the  autumn 
when  payments  are  due  for  our  cotton  and  grain,  and  for  us 
to  reciprocate  in  the  spring  when  we  are  more  likely  to  be  in 
its  debt. 

Gold  is  almost  the  last  article  exported.  We  exchange  all 
other  products  for  it.  It  must  be  borne  in  mind,  however, 
that  we  produce  it,  as  well  as  corn,  cotton,  etc.,  and  in  the 
natural  course  are  bound  to  export  it  from  time  to  time.  (See 
"  Balance  of  Trade,"  "  Bank  of  England,"  "  Gold  Import 
Point,"  and  "  Gold  Export  Point.") 

International  Postal  Money-Orders.  See  "  Postal  Money- 
Orders." 

International  Securities.  Securities  dealt  in  upon  both  the 
London  and  New  York  stock  exchanges. 

Inter-Relation  of  Interests.  At  times,  the  control  by  a 
certain  group  of  men  of  the  stock  of  one  or  more  railway 
companies,  and  control  on  the  part  of  these  railways  or  other 
companies  is  so  far-reaching,  and  the  operating  of  such  roads 
so  largely  dominated  or  influenced  by  the  group  of  men  men- 
tioned, that  competition,  which  otherwise  might  exist  between 


MONEY    AND    INVESTMENTS  221 

such  roads,  disappears,  on  account  of  the  "  inter-relation  of 
interests  "  existing.  Or  two  railway  companies  may  either 
by  direct  ownership,  or  through  the  control  of  their  own 
large  stockholders,  own  together  the  controlling  interest  in  a 
third  railway,  which,  on  account  of  this  common  ownership, 
may  be  operated  to  the  common  benefit  of  the  two  owning 
roads.  There  exists  here  an  "  inter-relation  of  interests." 

Intersecting  Street  Improvement  Bonds.  If  the  reader  will 
first  read  the  subject  "  Street  Improvement  Bonds  "  and  then 
read  what  is  given  under  "  Intercepting  Sewer  Bonds,"  it  will 
be  understood  that  "  intersecting  street  improvement  bonds  " 
are  bonds  issued  by  the  municipality  itself  to  defray  its  pro- 
portion of  the  street  improvement  expense  not  properly 
chargeable  against  the  abutting  property. 

Intestate.     Dying  without  leaving  a  will. 

In  the  Red.    See  "  Profit  and  Loss." 

In  the  Street.     See  "  Street." 

Into  Sight.  First  read  "  Visible  Supply."  "  Into  Sight  " 
refers  to  the  quantity  which  has  been  added  to  the  "  visible 
supply." 

Inventory.  A  schedule  of  property  owned,  with  the  market 
value  of  each  article  or  parcel.  An  inventory  of  a  dry  goods 
business  would  be  a  schedule  giving  goods  on  hand  not  sold, 
store  and  office  fixtures  and  furniture  of  all  kinds,  real  estate, 
if  any,  delivery  wagons,  etc.;  in  fact  everything  except  cash 
on  hand  or  due. 

Inverted  Pyramid.  Condition  of  insecurity.  (See  "  Pyra- 
miding.") 

Investment.  The  purchase  of  real  property,  stocks,  or  some 
evidence  of  indebtedness,  with  the  purpose  of  obtaining  an 
interest  return  upon  the  money;  any  increase  in  value  of  the 
principal  being  but  a  secondary  consideration,  but  the  safety 
of  the  principal  a  first  consideration.  Refer  to  "  Speculation," 
from  which  investment  differs.  As  one  writer  expresses  it, 
"  Planting  good  seed  in  fertile  soil,  is  investment;  betting  on 
how  many  potatoes  the  seed  will  produce  to  a  hill,  is  specula- 
tion." 

In  its  exact  sense  "  investment  "  is  concisely  defined  by 
Sprague:1  "  Investment  implies  divesting  one's  self  of  the 
possession  and  control  of  one's  assets  and  granting  such 
possession  and  control  to  another."  Also:  "  The  essence  of 
strict  investment  is  ...  a  share  of  the  gain  not  dependent 
on  the  fortunes  of  the  handler." 

Investment  Banker  (or  Broker).  A  dealer  in  investment 
securities.  He  buys  for  his  own  account  in  large  amounts, 

1 "  The  Accountancy  of  Investment,"  Charles  E.  Sprague. 


222  MONEY    AND    INVESTMENTS 

and  then  resells  (retails)  to  his  customers,  the  difference  be- 
tween the  buying  and  selling  prices  being  his  principal  profit. 
He  also  gains  or  loses  on  the  interest  which  the  investments 
pay  him  while  under  his  ownership  in  accordance  with  the 
prevailing  rates  for  money,  for  he  customarily  is  a  large 
borrower,  using  his  securities  as  "  collateral." 

Investment  Board.     See  "  Savings  Bank." 

Invisible  Supply.  The  amount  of  grain,  or  other  product, 
in  the  possession  of  the  farmers,  etc.,  and  which  has  not  yet 
reached  the  elevators  or  large  centres,  as  is  explained  under 
"  Visible  Supply." 

Invoice.  An  account,  descriptive  of  goods  sold,  with  prices, 
etc.,  furnished  the  buyer  by  the  seller. 

Involuntary  Bankruptcy.  See  "  Bankrupt." 
I.  O.  U.  These  letters  stand  for  "  I  owe  you,"  and,  as 
generally  used,  are  merely  an  acknowledgment  of  debt  in  the 
form  of  a  memorandum,  as:  "  I.  O.  U.  $10,"  followed  by  the 
signature  of  the  person  giving  it.  When  it  contains  a  formal 
promise  to  pay  upon  a  specified  time  it  becomes  a  "  promis- 
sory note." 

Iowa  Central.    Iowa  Central  Railway  Co. 
Irish  Dividend.    An  assessment;    the  stockholder  is  called 
upon  to  make  a  payment  instead  of  receiving  one;  a  humour- 
ous term  for  an  assessment. 

Iron  Production.  The  Wall  Street  Journal  gives  the  follow- 
ing statistics  which  are  a  value  in  showing  the  tremendous 
strides  which  this  country  has  made  in  the  production  of 
iron: 

Year  Production 

1905 22,992,380  tons 

1900 13,790,000 

1895 9,446,300 

1890 •. 9,202,700 

1885 4,044,500 

1880 3,835,200 

1875 2,023,700 

1870 1,665,200 

1865 831,000 

1860 821,000 

Irredeemable  Debentures.  In  Great  Britain,  for  example, 
there  have  been  issued  many  railroad  company  "  debentures  " 
(see  "  Debenture  Bond  ")  which  have  no  fixed  dates  of 
maturity,  as  in  the  case  of  our  bond  issues,  but  which  are 
irredeemable;  perpetual;  more  like  a  stock. 

The  English  railroads  labour  under  this  disadvantage: 
many  of  these  "  irredeemable  debentures  "  bear  a  high  rate  of 
Interest,  which  is  a  perpetual  charge  upon  the  companies. 


MONEY    AND    INVESTMENTS  223 

It  would  be  of  great  advantage  to  them  if,  in  times  when  low 
interest  rates  were  prevailing,  these  issues  might  be  converted 
or  "  refunded,"  as  we  say,  into  lower  interest-bearing  securi- 
ties, and  thus  an  interest  saving  for  all  time  to  come  be  ac- 
complished. The  irredeemable  feature  prevents  this,  however. 

Irredeemable  Paper  Money.  See  "  Inconvertible  Paper 
Money." 

Irregular.  Many  variations  in  prices;  some  securities 
advancing,  others  declining. 

Irrevocable.  Something  which  must  remain  in  force;  cannot 
be  recalled.  An  irrevocable  "  power  of  attorney  "  (see  the 
subject  in  quotations),  for  illustration,  is  one  which  is  not  sub- 
ject to  recall  or  cancellation. 

Irrigation  Bonds.  In  many  sections  of  the  West,  in  order  to 
successfully  carry  on  agriculture,  artificial  irrigation  must  be 
maintained.  Companies  are  sometimes  formed  which  under- 
take this  work,  and  which  issue  bonds  for  the  purpose  of 
raising  money  towards  defraying  the  cost.  Again,  sections 
of  a  State  may  be  set  aside  in  the  form  of  a  district,  called  an 
"  irrigation  district,"  which  may  be  authorized  to  issue  bonds 
for  irrigation  purposes,  and  which  are  payable  from  taxes 
levied  upon  all  the  taxable  property  in  this  district.  This  is  a 
form  of  municipal  bond,  and,  likewise,  is  somewhat  of  the 
nature  of  a  "  special  assessment  bond." 

Matters  to  be  considered  before  investing  money  in  bonds  of 
this  kind,  whether  issued  by  company  or  district,  are:  First, 
the  general  character  of  the  section  benefited;  whether  by 
the  artificial  application  of  water  a  fertile  and  productive 
agricultural  section  is  produced.  Next,  the  water  supply; 
its  permanency,  sufficiency,  and  the  legal  right  to  use  the  re- 
quired amount.  Again,  the  class  of  settlers  or  farmers  dwelling 
in  the  irrigated  section.  Of  course  the  near  location  of  a 
market  and  transportation  facilities  are  also  important. 

I.  S.  C.     Interstate  Commerce. 

Isle  Royale.     The  Isle  Royale  Copper  Co. 

Issue  House.     See  "  House  of  Issue." 

Issue  Par.  The  price  at  which  a  security  is  first  sold,  or 
issued,  regardless  of  its  actual  face  value. 

Issue  Price.  The  price  at  which  an  issue  of  securities  is 
offered  to  the  public.  In  the  case  where  an  issue  had  been 
previously  underwritten,  "  issue  price  "  is  used  in  contrast  to 
"  underwriting  price,"  the  difference  in  the  two  prices  repre- 
senting the  underwriter's  profit,  from  which  certain  commis- 
sions or  other  expenses  may  be  deducted. 

Item.    Each  check  or  draft,  etc.,  which  a  bank  presents  at 


224  MONEY    AND    INVESTMENTS 

the  "  clearing-house  "  is  referred  to  as  an  "  item."  Cannon 
states,  "  The  word  is  frequently  employed  in  combination 
with  a  qualifying  term,  as,  for  example,  '  collection  items/ 
out-of-town  items,'  '  city  items,'  etc." 


Jacking  Up.     See  "  Jackscrewing." 

Jackscrewing.  Fortunately  an  uncommon  term.  It  is  a 
pity  that  the  financial  writers  of  newspapers  cannot  find  more 
fitting  words  to  express  their  meaning.  "  Jackscrewing  " 
means  putting  great  power,  as  it  were,  beneath  the  market 
and  forcing  prices  up  to  unnatural  levels.  The  comparison 
to  the  great  power  of  the  builders'  "  jack,"  by  the  use  of  which 
enormous  buildings  can  be  lifted,  or  forced  upwards,  explains 
the  application. 

Jail  Bonds.  A  form  of  municipal  indebtedness  created  for 
the  purpose  of  building  or  enlarging  a  jail  and,  usually,  a 
county  obligation. 

J.  A.  J.  0.  January,  April,  July,  October;  interest  or 
dividends  payable  quarterly,  beginning  with  January. 

J.  and  D.  Interest  or  dividends  payable  semi-annually, 
June  and  December. 

J.  and  J.  Interest  or  dividends  payable  semi-annually, 
January  and  July. 

Jeweller's  Bar.  For  use  in  the  manufacture  of  jewelry, 
etc.,  fine  gold  is  cast  in  the  form  of  small  ingots  or  bars,  valued 
at  about  $100  and  upwards. 

Jobber.  An  English  term  referring  to  a  London  Stock  Ex- 
change member,  who  deals  only  between  other  members  of 
the  Exchange,  and  is  distinguished  from  the  broker,  who, 
although  also  a  member  of  the  Exchange,  executes  orders  for 
the  general  public.  The  broker,  however,  deals  directly  with 
the  "  jobber  "  (it  being  contrary  to  custom  for  the  brokers 
to  negotiate  with  eachother),  who,  at  request,  submits  a  buying 
and  selling  price  on  each  security,  the  broker  having  the 
privilege  of  making  a  transaction  either  way  in  accordance 
to  the  desire  of  his  customer.  The  "  jobber,"  of  course,  buys 
for  his  own  account  and  may  properly  be  termed  a  "  middle- 
man." 

The  use  of  word  "  stock-jobber  "  in  London  dates  back  to 
1688. 

Jobber  of  Exchange.  One  who  sells  "  exchange  "  to  banks 
and  other  dealers  in  "  foreign  exchange,"  who  resell  to  their 
own  clients.  The  "  jobber  "  might  be  termed  the  wholesaler 


MONEY    AND    INVESTMENTS  225 

of  "  exchange,"  and  those  with  whom  he  deals,  the  re- 
tailers. 

Jobber's  Turn.  A  London  Stock  Exchange  term.  (See 
"  Jobber.")  The  "  turn  "  is  the  profit  which  the  "  jobber  " 
makes  on  a  transaction  with  a  "  broker,"  but  it  is  understood 
that  one  party  to  the  transaction  is  the  "  broker  "  and  the 
other  party  another  "  jobber."  When  trading  between 
brokers,  that  is,  buying  from  one  broker,  for  instance,  and 
selling  to  another,  he  really  makes  two  "  turns." 

Joe.     See  "  Fourpence." 

Joint  Account.  Two  or  more  persons  having  mutual  or 
"  joint  "  interest  in  a  venture  or  enterprise.  A  simple  ex- 
ample: Two  bankers  buy  $100,000  bonds  at  98  "  on  joint 
account."  These  bonds  are  sold  at  100.  There  is,  therefore, 
$2,000  to  divide  between  the  two  bankers,  each  being  first 
allowed  to  charge  up  all  his  expenses  incurred  in  the  trans- 
action. The  conditions  of  each  "  joint  account  "  may  vary 
greatly.  One  banker  may  "  carry  "  all  the  bonds  and  be 
allowed  a  special  profit  for  so  doing;  or,  each  may  be  allowed 
a  commission  for  all  bonds  which  he  sells;  or  other  conditions 
depending  upon  the  details  of  each  individual  transaction. 

A  "  joint  account  "  in  "  exchange  "  has  reference  to  a 
division  between  the  banker  drawing  the  "  exchange  "  and 
the  one  expected  to  honour  it,  of  the  profits  arising  from  loaning 
the  proceeds  in  the  latter's  market  at  the  prevailing  (high) 
rates  of  interest.  (See  "  Sterling  Loan.") 

Joint  and  Several  Note.  In  a  note  of  this  kind  any  one  of  the 
signers  can  be  held  responsible  for  the  entire  amount  of  the 
note  in  case  of  inability  to  pay  on  the  part  of  the  other,  or 
they  can  all  be  held  equally  if  each  is  financially  able  to  meet 
his  proportion.  In  other  words,  they  are  liable  for  its  payment 
all  together,  and  liable  for  its  payment  individually.  (See 
"  Joint  Note.") 

An  ordinary  promissory  note  beginning  "  I  promise  to  pay," 
and  then  signed  by  each  of  the  parties,  or  by  a  firm,  as  "  Good 
&  Company,"  is  a  "  joint  and  several  note;  "  also  one  reading, 
"  We  jointly  and  severally  promise  to  pay,"  signed  as  above. 

Some  States  make  all  obligations  of  two  or  more  persons 
"  joint  and  several  "  unless  the  instrument  expressly  provides 
that  the  obligation  shall  be  "  joint  "  only. 

Joint  Bonds.  There  are  not  many  such  bonds  in  existence. 
The  best  example  is  the  "  joint  bond  "  issued  by  the  Northern 
Pacific  and  Great  Northern  Railroad  Companies.  The  ma- 
jority of  the  stock  of  the  Chicago,  Burlington  &  Quincy 
Railroad  Co.  was  purchased  in  the  interests  of  both  the  Great 
Northern  and  Northern  Pacific  Railroads,  and  a  "  joint 
bond,"  so-called,  issued,  being  the  direct  obligation  of  both 


226  MONEY    AND    INVESTMENTS 

the  companies  in  question,  secured  by  a  deposit  of  the 
Chicago,  Burlington  &  Quincy  stock  at  $200  per  share,  and 
guaranteed  by  the  two  first  named  railroads  above.  The 
Chicago,  Burlington  &  Quincy  Railroad  Co.  already  has  its 
own  bonded  debt.  This  security  is  in  reality  a  "  collateral 
trust  "  issue  and  is  so  called  on  the  bond;  a  "  joint  collateral 
trust." 

Joint  Collateral  Trust  Bonds.    See  last  subject. 

Joint  Indorsement.  Sometimes  a  note  is  made  payable 
to  two  or  more  persons,  not  partners.  Their  indorsement  in 
such  a  case  is  "  joint." 

Joint  Mortgage.  This  is  explained  under  "  Joint  Bonds;  " 
that  is  to  say,  such  a  bond  as  there  described  would  be  a 
"  joint  mortgage  bond  "  if  secured  by  a  mortgage  on  the 
property  of  the  Chicago,  Burlington  &  Quincy  R.  R.  Co.,  and 
guaranteed  by  the  Great  Northern  and  Northern  Pacific  Rail- 
road Companies. 

Joint  Note.  First  read  "  Joint  and  Several  Note."  A 
"  joint  note  "  is  one  signed  by  two  or  more  persons,  but  the 
wording  of  which  begins  "  We  promise  to  pay  "  -  the  words 
"  joint  and  several  "  must  not  be  inserted.  In  case  the  note 
is  not  paid  at  maturity,  the  holder  must  get  judgment  against 
all  the  signers,  and  take  out  a  "  joint  "  execution  against  them 
all;  but  then  he  can  proceed  to  satisfy  the  judgment  out  of 
the  property  of  any  one  of  the  signers.  The  ordinary  note  of 
a  firm,  as  Small  &  Bigelow,  is  a  "  joint  note,"  as  well  as  a  note 
signed  by  two  or  more  individuals. 

Joint-Stock  Bank.  This  is  a  term  used  in  Great  Britain 
rather  than  America,  and  refers  to  the  incorporated  banks; 
that  is,  banks  whose  ownership  is  represented  by  shares  of 
stock,  much  the  same  as  our  "  national  banks."  It  is  used  to 
designate  the  incorporated  banks  from  the  Bank  of  England 
and  from  private  bankers.  The  "  joint-stock  banks  "  all 
keep  their  "  reserves "  with  the  Bank  of  England.  The 
English  "  joint-stock  bank  "  came  into  existence  during  the 
fourth  decade  of  the  nineteenth  century. 

In  a  treatise  upon  the  Athenian  revenue  published  by 
Xenophon  will  be  found  the  first  suggestion  for  the  creation 
of  a  "  joint-stock  bank." 

Joint-Stock  Company.  A  company  whose  ownership  is 
represented  by  shares  of  stock.  Although  this  term  is  occa- 
sionally used  in  America,  it  is  much  more  common  in  Great 
Britain.  This  term  is  also  subject  to  two  interpretations. 
In  the  first  place,  the  ordinary  corporation  with  shares  of 
stock,  or,  as  defined  by  the  General  Corporation  Laws  of  West 
Virginia,  "  the  words  joint-stock  company  include  every 
corporation  having  a  joint-stock  or  capital  divided  into 


MONEY    AND    INVESTMENTS  227 

shares  owned  by  the  stockholders  respectively."  And  then 
another  class,  which  is  really  an  exaggerated  form  of  partner- 
ship, the  participants  in  which  do  not  own  shares  of  stock, 
but  certificates  showing  their  joint  interest  in  the  concern 
or  company.  Holders  of  this  form  of  a  certificate  are  per- 
sonally liable  for  the  debts  of  a  concern  the  same  as  in  a  part- 
nership, and  they  have  not  the  limited  liability  of  the  share- 
holders of  the  ordinary  corporation  with  which  we  are  so 
familiar.  A  partnership  of  this  kind  does  not  end  by  the 
death  of  a  member,  nor  has  each  certificate  owner  the  right 
to  transact  business  for  the  concern  as  in  an  ordinary  partner- 
ship. This  class  of  "  joint-stock  companies  "  is  not  very 
common  in  America,  but  a  good  example  is  that  of  some  of 
our  large  express  companies,  such  as  the  Adams,  American, 
and  United  States,  which  are  organized  under  a  New  York 
law,  by  which  they  have  the  right  to  issue  transferable  shares 
representing  beneficial  interests  in  the  companies. 

J.  O.  J.  A.  July,  October,  January,  and  April;  interest  or 
dividends  payable  quarterly  beginning  with  July. 

Journal.  Those  keeping  a  record  of  their  transactions  with 
others  use  an  account  book  termed  a  "  journal,"  in  which  is 
entered  the  daily  record  of  all  transactions,  which  are  not 
cash,  which  latter,  of  course,  are  entered  in  the  "  Cash  Book." 
The  chief  uses  of  a  journal  are  for  entries  in  closing  or  balancing 
accounts,  charging  off  profits -or  losses,  and  making  entries  of 
correction.  In  double  entry  bookkeeping,  entries  are  so 
made  that  not  only  the  accounts  to  which  these  items  are 
afterwards  to  be  posted  in  the  ledger  will  show,  but  whether 
to  the  debit  or  credit  of  such  account. 

J.  S.  D.  M.  June,  September,  December,  March;  interest 
or  dividends  payable  quarterly,  beginning  with  June. 

Judgment  Bond.  Issued  in  satisfaction  of  a  debt  adjudged 
legal  by  a  decision  of  the  court.  Such  bonds,  presupposing  an 
ability  to  pay,  are  considered  safe;  the  courts  recognizing 
no  right  of  the  issuing  party  to  avoid  payment  unless  the  exis- 
tence of  fraud  in  obtaining  the  judgment  can  be  demon- 
strated. 

Judgment  Debt.  An  indebtedness  which  has  been  legalized 
by  action  of  a  court. 

Judgment  Note.  When  a  debtor  wishes  to  avoid  having  a 
law  suit  brought  against  him,  he  may  be  willing  to  acknowl- 
edge the  debt  by  giving  a  "  judgment  note,"  which  is  simply 
an  ordinary  promissory  note  containing  a  power  of  attorney 
to  appear  and  confess  judgment  for  him. 

Junior  Bonds  or  Securities.  Bonds  over  which  another  issue 
has  precedence,  and  which,  in  case  of  foreclosure,  would  have 
prior  claim  upon  the  property. 


228 


MONEY    AND    INVESTMENTS 


Junior  Lien.    See  "  Junior  Mortgage." 

Junior  Mortgage.  A  mortgage  over  which  some  other 
mortgage  would  take  precedence  in  the  case  of  foreclosure. 
"  Junior  mortgages  "  would  have  reference  to  all  but  the 
"  first  mortgage." 

J.  &  D.  Interest  or  dividends  payable  semi-annually; 
June  and  December. 

J.  &  J.  Interest  or  dividends  payable  semi-annually, 
January  and  July. 

/ 

K 

Kaffir  Circus.  The  name  given  to  that  particular  part  of 
the  London  Stock  Exchange  in  which  the  jobbers  and  brokers 
who  deal  in  "  Kaffirs  "  stand.  (See  next  subject.) 

Kaffirs.  Mining  securities  of  the  Johannesburg  District  of 
South  Africa. 

Kangaroos.  A  term  for  the  securities  (mining,  etc.)  of 
West  Australia,  dealt  in  upon  the  London  Stock  Exchange. 

Katy.    Missouri,  Kansas,  and  Texas  Railway  Co. 

Keep  Alive.  Not  cancelled,  but  still  drawing  interest.  If 
a  company  buys  in  some  of  its  own  bonds  for  its  "  sinking 
fund  "  account,  and  continues  to  pay  interest  on  them  as  if 
in  the  hands  of  an  outside  party,  the  bonds  are  said  to  be 
"  kept  alive." 

Killing.    To  make  a  "  killing  "  is  to  profit  handsomely. 

Kiting,  Kite  Flying,  or  Kiting  Checks.  This  is  a  method  of 
sustaining  a  fictitious  balance  in  a  bank  by  the  use  of  accom- 
modation paper,  and  all  depends  upon  the  custom  which 
banks  pursue  of  giving  the  depositor  credit  for  checks  of 
other  people  as  soon  as  deposited,  and  without  waiting  until 
the  same  have  been  collected.  As  an  example,  Green  and 
Brown  agree  to  exchange  checks  for  $1,000  each.  Each  wants 
immediate  use  of  all  or  part  of  that  sum.  Each,  accordingly, 
gives  the  other  his  check  for  $1,000,  which  is  properly  de- 
posited in  his  respective  bank.  They  go  on  the  principle  that 
the  checks  will  not  be  collected  before  the  following  day, 
each  expecting  to  make  the  amount  good  at  his  own  bank 
before  it  is  collected. 

This  same  method  may  be  adopted  by  a  man  having  two 
different  bank  accounts,  —  depositing  in  one  account  a  check 
against  the  other,  expecting  to  make  it  good  at  the  latter 
bank  the  following  day. 

Kiting  Stocks.  Pushing  the  prices  of  stocks  to  high  levels 
not  warranted  by  the  established  earning  powers  of  proper- 
ties; trying  to  establish  new  high  records  in  prices. 


MONEY    AND    INVESTMENTS  229 

Kitty.    The  Missouri,  Kansas  and  Texas  Railway  Co. 

Knocked  Down.  The  declaration  on  the  part  of  an  auc- 
tioneer that  a  sale  has  been  effected;  i.  &.  "  sold,"  is  equivalent 
to  the  above. 

Kontingent.    See  "  Bank  of  Germany." 

Kopeck.  A  Russian  silver  "  kopeck  "  is  one-hundredth 
part  of  their  "  ruble,"  and  is  equal  to  about  one-half  cent 
United  States  money.  The  copper  "  kopeck  "  is  estimated  at 
$.0075  in  our  money. 

Kran.  The  monetary  unit  of  Persia,  and  equivalent  to 
about  $.081  United  States  money. 

Krone.  The  monetary  unit  of  Austria-Hungary,  and 
equivalent  to  $.203  United  States  money.  Also  the  monetary 
unit  of  Norway,  Sweden,  and  Denmark,  being  equivalent 
to  $.268  United  States  money. 

Ks.  The  sign  used  in  the  Austria-Hungary  monetary  system 
for  the  "  crown,"  as  $  is  for  our  dollar. 

K.  T.    Missouri,  Kansas  &  Texas  Railway  Company. 


L.     Abbreviation  for  Elevated  Railway. 

Lac  (or  Lakh).  One  hundred  thousand  "  rupees."  (See 
that  subject.) 

Lackawanna.    Delaware,  Lackawanna  &  Western  R.  R.  Co. 

Lafayette  Dollar.  United  States  silver  dollars,  of  special 
design,  minted  during  1900  in  recognition  of  the  unveiling  of 
the  statue  of  Lafayette,  at  Washington,  D.  C.  Total  amount 
coined  $50,026;  weight,  412^  grains;  fineness,  .900. 

Lake  Copper.  Copper  mined  in  the  vicinity  of  Lake 
Superior.  It  is  found  pure  in  the  rock.  Ordinarily  the  best 
qualities  are  tougher  and  stronger  than  any  copper  made  from 
ore  and  give  an  electrical  conductivity  of  about  100%  of  that 
attributed  to  chemically  pure  copper. 

Lake  Shore.  Lake  Shore  &  Michigan  Southern  Ry.  Co.  Con- 
trolled by  the  New  York  Central  &  Hudson  River  R.  R.  Co. 

Lakh.    See  "  Lac." 

Lamb.    See  "  Fleece." 

Lame  Duck.  A  person,  usually  a  speculator,  temporarily 
financially  embarrassed. 

Land  Grant  Bonds.  These  are  not  very  common  to-day, 
but  were  formerly  issued  by  railway  companies  which  pledged, 
as  security  for  same,  lands  granted  them  by  the  Government, 
and  usually  redeemed  from  the  proceeds  of  their  sale. 


230  MONEY    AND    INVESTMENTS 

Land  Grant  Certificates.  See  "  Land  Grant  Bonds,"  which 
do  not  differ  materially  in  the  form  of  security  pledged  for 
their  payment. 

Lapse.  A  life  insurance  policy  "  lapses  "  when  the  holder 
fails  to  pay  a  premium  due,  by  which  he  loses  his  rights  under 
the  original  contract.  But  he  is  generally  given  a  "  paid-up  " 
policy  or  "  extended  insurance  "  policy  at  his  option. 

Lard.  The  trading  unit  is  250  tierces,  weighing  340  Ibs. 
each.  The  commission  charged  for  the  purchase  or  sale,  or  for 
the  purchase  and  sale  of  lard  in  250  tierce  lots,  or  multiples 
thereof,  is  6  cents  per  tierce.  The  usual  "  margin  "  required 
is  ^  cent  per  pound. 

Latin  Union.  This  consists  of  France,  Belgium,  Italy, 
Greece,  and  Switzerland,  which  have  adopted  a  common 
monetary  unit,  viz.,  the  "  franc;  "  the  gold  "  franc  "  being 
equal  to  19.3  cents  United  States  money.  In  Italy  the  unit 
is  called  "  lira,"  but  has  the  same  value  as  the  "  franc;  " 
and  in  Greece  the  "  drachma." 

Laundry  (or  Laundry  Business).  This  has  reference  to 
"  washing,"  so-called.  (See  "  Wash  Sales.") 

Law,  John.  A  Scotch  financier  and  an  advocate  of 
paper  currency.  In  May,  1716,  he  founded  in  Paris,  France's 
first  banking  institution,  the  Banque  G6nerale,  and  issued 
paper  currency  in  accordance  with  his  views.  These  notes 
were  accepted  in  payment  of  taxes,  and  soon  were  at  a  pre- 
mium. In  1717  the  French  Government  gave  him  control 
of  Louisiana  for  the  purposes  of  trade  and  colonization,  and 
the  Compagnie  d'Occident  was  formed  accordingly.  It  was 
commonly  called  the  "  Mississippi  Company/'  but  afterwards 
became  known  as  the  "  Mississippi  Scheme,"  or  "  Bubble." 
Later,  the  East  India,  China,  and  Africa  companies  were 
absorbed,  and  the  company  took  over  the  control  of  the  Mint, 
besides  the  powers  of  "  Receivers-General,"  thus  becoming 
of  vast  importance  in  foreign  commercial  affairs,  as  well  as 
home  financial  matters.  The  Banque  Ge"nerale,  in  1718,  was 
changed  to  Banque  Royale.  In  1720,  Law  became  Controller- 
General  of  Finance,  and  the  company  and  bank  became  one. 
Prosperous  conditions  only  continued  for  a  short  time,  how- 
ever, from  the  fact  that  there  was  an  over-issue  of  paper 
money  and  the  Government  became  antagonistic  to  Law's 
scheme,  so  in  May,  1720,  after  a  tremendous  speculative 
craze,  a  complete  collapse  occurred  and  Law  left  the  country. 

Lawful  Money.  Money  which  the  Government  declares  to  be 
legal  tender  (see  "  Legal  Tender  ")  in  payment  of  obligations; 
money  which  the  creditor  may  not  refuse  in  the  payment  of 
a  debt  except  where  otherwise  expressly  stipulated  in  the 
contract. 


MONEY    AND    INVESTMENTS  231 

The  "  Opinions  of  the  Attorney  General  of  the  United 
States  "  gives  the  following:  "  The  term  '  lawful  money  ' 
is  understood  to  apply  to  every  form  of  money  which  is  en- 
dowed by  law  with  the  legal  tender  quality." 

Under  the  revised  statutes  of  the  United  States,  neither 
gold  certificates,  silver  certificates,  nor  national  bank  notes 
are  endowed  with  legal  tender  properties. 

Clearing-house  certificates,  representing  specie  or  lawful 
money  specially  deposited  for  the  purpose,  of  any  clearing- 
house national  bank  shall  be  deemed  to  be  lawful  money  in 
the  possession  of  any  association  belonging  to  such  clearing- 
house, holding  and  owning  such  certificate,  for  the  purposes 
of  "  reserve." 

The  term  "  lawful  money,"  when  applied  to  what  are 
known  as  "  gold  banks,"  "  shall  be  construed  to  mean  gold 
or  silver  coin  of  the  United  States." 

Lawful  Money  Bonds.  Bond  payable  in  "  lawful  money  " 
(see  that  subject)  of  the  United  States. 

L.  C.  L.    Less  than  car-load  lots. 

Ld.  gt.    Land  Grant. 

Lead.    National  Lead  Co. 

Ledger.  Among  the  books  kept  by  firms,  corporations,  etc., 
transacting  business  with  others,  is  an  account  book  termed 
a  "  ledger,"  in  which  is  entered  a  record  of  all  transactions, 
either  money  or  otherwise,  so  that  upon  one  side  shall  be 
everything  to  the  credit  of  a  certain  account,  and,  upon  the 
other,  everything  against  it.  This  is  accomplished  by  "  post- 
ing "  —  carrying  from  one  book  of  accounts  to  another  — 
from  the  "  journal  "  and  "  cash  book  "  in  double  entry  book- 
keeping, and  from  the  "  day  book  "  and  "  cash  book,"  if  such 
books  are  used,  in  single  entry  bookkeeping. 

Legal  Holidays.  A  day,  other  than  Sunday,  which,  so  far 
as  business  of  many  kinds  is  concerned,  has  lawfully  the 
same  status  as  that  day.  Upon  a  "  legal  holiday  "  notes  may 
not  be  collected.  Banks  and  all  public  offices  are  closed. 
Practically  no  business  is  carried  on  except  that  of  public 
service  corporations  or  for  the  pleasure  and  entertainment 
of  the  masses.  In  every  State  when  a  "  legal  holiday  "  falls 
on  Sunday  the  next  day  is  set  aside  in  its  stead,  except  in 
Louisiana,  which  observes  the  same  day,  and  Washington, 
which  observes  the  day  preceding.  Sunday,  Christmas,  and 
July  4th  are  legal  holidays  in  every  State  of  the  Union,  but 
not  necessarily  so  the  other  holidays.  Each  State  makes  its 
own  separate  laws  in  relation  to  such  days.  In  many  States 
notes  or  other  negotiable  paper  due  on  a  "  legal  holiday  "  are 
payable  the  day  following.  In  New  York,  for  illustration,  if 
negotiable  paper  falls  due  on  July  4th,  and  it  so  happens  that 


232  MONEY    AND    INVESTMENTS 

that  day  is  a  Saturday,  then  it  should  be  presented  for  pay- 
ment Monday,  the  6th. 

In  the  lack  of  absolute  knowledge  on  such  point  it  is  de- 
sirable to  look  it  up,  for,  in  some  States,  it  is  payable  the 
day  before. 

Legal  Investments  for  Savings  Banks.  Expressions  like 
"  legal  for  Massachusetts  savings  banks,"  or  "  legal  for  New 
York  savings  banks,"  have  appeared  so  many  times  in  circu- 
lars of  bond  houses  in  connection  with  this,  that,  and  the 
other  bond,  that  it  seems  almost  as  if  every  one  who  has  had 
occasion  to  look  at  such  circulars,  must  either  have  accepted 
these  phrases  without  attaching  any  particular  meaning  to 
them,  or  must  have  a  clear  understanding  of  what  is 
meant. 

This  information  is  given  in  connection  with  describing 
an  issue  of  bonds  for  two  purposes:  First,  to  notify  a  bank 
official  that  the  bonds  can  be  purchased  by  his  bank  in  strict 
compliance  with  the  law;  Second,  to  give  the  bond  recom- 
mendation to  a  private  investor  from  the  fact  of  its  being  legal 
for  savings  banks  to  purchase.  The  laws  of  the  majority  of 
States  regulate  specifically  in  what  bonds,  stocks,  etc.,  a 
savings  bank  may  invest  the  money  of  its  depositors.  Limi- 
tations placed  upon  such  investments  differ  in  the  various 
States,  but,  at  the  time  of  writing,  the  order  in  which  the  larger 
Eastern  States  may  be  classed,  beginning  with  the  State  which 
most  strictly  limits  its  investments,  and,  therefore,  whose 
investments  would,  as  a  rule,  be  accepted  as  the  safest,  is  as 
follows:  New  York,  Massachusetts,  Connecticut,  Vermont, 
Maine,  New  Hampshire;  there  is  practically  no  limitation 
upon  the  investments  of  Rhode  Island  savings  banks,  and 
comparatively  little  upon  New  Jersey,  Pennsylvania,  and 
Maryland. 

Legality  of  Securities.    See  "  Attorney's  Opinion." 

Legal  Name  of  a  Woman.    See  "  Woman's  Signature." 

Legal  Opinion.    See  "  Attorney's  Opinion." 

Legal  Rate  of  Interest.  A  fixed  rate,  established  by  State 
law,  greater  than  which  no  charge  may  be  made  for  the  use  of 
money.  An  interest  charge  exceeding  the  legal  rate  is  called 
"  usury  "  and  may  be  penalized  by  the  courts.  In  some 
States  no  attempt  is  made  to  interfere  between  the  lender  and 
borrower  establishing  any  agreed  rate  of  interest,  the  legal 
rate  in  such  cases  being  simply  to  prevent  creditors  exacting 
unfair  rates  from  the  debtors. 

No  national  bank  is  allowed  to  charge  interest  in  excess 
of  the  legal  rate  of  the  State  in  which  located.  In  absence 
of  such  State  limitation,  a  national  bank  may  charge  a  maxi- 
mum rate  of  7%. 


MONEY  AND   INVESTMENTS  233 

In  New  York  State  any  rate  of  interest  is  legally  permitted 
on  "collateral  call  loan"  of  $5,000  or  upwards,  but  in  that 
State,  as  elsewhere,  the  regular  legal  rate  is  often  successfully 
evaded  by  charging  the  borrowers  a  commission  in  addition  to 
the  interest  rate. 

That  there  has  long  been  an  effort  to  prevent,  by  legisla- 
tion, an  excessive  interest  charge  is  shown  by  the  fact  that 
during  the  reign  of  Henry  VIII.  all  interest  above  10%  was 
declared  unlawful.  During  the  reign  of  James  I.  this  rate 
was  reduced  to  8%  and  during  Queen  Anne's  time  to  5%.* 

Legal  Requirement.  As  used  in  reference  to  the  bank 
"reservs"  it  is  explained  under  that  subject. 

Legal  Reserve.  As  used  in  the  "  Bank  Statement,"  this 
has  reference  to  the  required  "  reserve,"  as  explained  under 
the  first  part  of  that  subject.  It  is  the  amount  of  lawful 
money  which  a  national  bank  must  hold  at  all  times  on  hand 
( or  partly  in  the  keeping  of  its  "  rese  ve  agent "  )  to  meet  the 
demands  of  its  depositors. 

Legals.     Meaning  the  same  as  "  Legal  Tenders." 

In  some  sections  of  the  country,  the  securities  which  are 
legalized  investments  for  the  savings  banks  to  buy  are  referred 
to  by  the  dealer  as  "  legals."  (See  "  Legal  Investments  for 
Savings  Banks.") 

Legal  Tender.  Money  which  may  be  legally  used  in  the 
payment  of  a  debt,  and  which  the  creditor  must  accept.  The 
laws  of  the  United  States  specifically  state  the  legal  tender 
qualities  of  all  forms  of  money  in  this  country,  as  follows  : 

"Gold  coins,  standard  silver  dollars,  subsidiary  silver,  minor 
coins,  United  States  notes,  and  Treasury  notes  of  1890  have 
the  legal  tender  quality  as  follows  :  Gold  coin  is  legal  tender 
for  its  nominal  value  when  not  below  the  limit  of  tolerance  in 
weight ;  when  below  that  limit  it  is  legal  tender  in  proportion 
to  its  weight ;  standard  silver  dollars  and  Treasury  notes 
of  1890  are  legal  tender  for  all  debts,  public  and  private,  ex- 
cept where  otherwise  expressly  stipulated  in  the  contract ; 
subsidiary  silver  is  legal  tender  to  the  extent  of  $10,  minor 
coins  to  the  extent  of  25  cents,  and  United  States  notes  for 
all  debts,  public  and  private,  except  duties  on  imports  and 
interest  on  the  public  debt.  Gold  certificates,  silver  certificates, 
and  national  bank  notes  are  non-legal  tender  money.  Both 
kinds  of  certificates,  however,  are  receivable  for  all  public 
dues  ;  and  national  bank  notes  are  receivable  for  all  public 
dues  except  duties  on  imports,  and  may  be  paid  out  for  all 
salaries,  demands,  etc.,  owing  by  the  Government  within  the 
United  States,  except  interest  on  the  public  debt  and  in  the 
redemption  of  the  national  currency." 

l"  Wealth  of  Nations,"  Adam  Smith. 


234  MONEY    AND    INVESTMENTS 

Foreign  coins  are  not  legal  tender  in  the  United  States. 

Before  the  Civil  War,  gold  and  silver  coins  were  the  only 
recognized  legal  tender  money  in  this  country. 

During  Massachusetts'  Colonial  days,  when  other  money 
became  scarce,  wampum  was  made  a  "  legal  tender  "  up  to 
a  limited  amount  and  at  a  fixed  rate.  In  the  same  manner, 
tobacco  was  used  in  Virginia,  and  tobacco  and  Indian  corn 
in  Maryland.1 

"  Cours  legal  "  is  the  French  term  for  "  legal  tender." 

Legal  Tender  Bonds.  Bonds  payable  in  any  "  legal  tender  " 
(see  that  subject)  money  of  the  United  States. 

Legal  Tender  Certificate.  A  Government  receipt  formerly 
issued  in  exchange  for  "  legal  tender  notes  "  deposited  in  a 
"  sub-treasury,"  and  only  negotiable  among  members  of  the 
"  clearing-house  association  "  in  the  city  where  issued.  It 
was  necessary  that  it  bear  the  indorsements  both  of  the  bank 
to  which  issued  and  the  bank  presenting  it  for  redemption. 
Also  called  "  currency  certificate."  They  are  no  longer  used. 

Legal  Tender  Note.  (Read  "  Legal  Tender.")  Paper  money, 
which,  by  law,  is  "  legal  tender."  It  must  be  borne  in  mind, 
however,  that,  whereas,  silver  and  gold  are  receivable  in 
every  section  of  the  world  at  their  known  intrinsic  value,  a 
"  legal  tender  note  "  of  the  United  States,  for  instance,  would 
not  be  accepted  in  sections  of  the  world  where  the  inhabitants 
were  ignorant  of  the  ability  to  pay  on  the  part  of  the  issuer. 

Legal  Trust.    See  "  Trust." 

Lei.  The  monetary  unit  of  Roumania;  being  the  same  as 
the  French  "  franc  "  or  $.193  United  States  money. 

Lending  Stocks.    See  "  Borrowing  Stocks." 

Letter  of  Advice.  This  is  a  written  notice  used  in  "  ex- 
change "  (to  which  refer)  transactions,  and  sent  from  the  one 
drawing  the  "  bill  "  to  the  one  expected  to  pay  it. 

Letter  of  Credit.  (A  fuller  understanding  of  this  may  be 
had  by  first  reading  "  Exchange.")  A  method  by  which 
persons  travelling  can  obtain  money  at  different  points,  thus 
making  it  unnecessary  to  carry  a  large  sum  at  the  outset. 
The  method  of  procuring  a  "  letter  of  credit  "  is  to  go  to  some 
bank,  or  banking  house,  making  a  practice  of  selling  the 
same,  and  deposit  money,  or  approved  securities,  sufficient 
to  cover  the  credit  desired,  in  addition  to  which  will  be  paid  a 
small  charge  for  the  accommodation.  The  customer  receives 
a  written  order  which  is  good  when  presented  at  certain  banks 
or  banking  houses,  in  such  cities  as  the  traveller  intends  to 
visit,  for  payment  to  him  of  sums  of  money  not  greater  in  the 
aggregate  than  the  face  value  of  the  "  letter  of  credit."  They 

1 "  Money  and  the  Mechanism  of  Exchange,"  Jevons. 


MONEY    AND    INVESTMENTS  235 

are  good  at  all  important  points  throughout  the  world.  When 
a  stranger  wishes  to  buy  a  credit,  it  is  desirable  to  bring  a 
letter  of  introduction  from  a  bank  bearing  not  only  the  sig- 
nature of  some  officer  of  the  bank,  but  the  signature  of  the 
bearer  as  well,  or  to  arrange  some  other  method  of  satisfactory 
introduction.  The  holder  of  one  of  these  "  circular,"  or 
"  traveller's  letters  of  credit  "  is  identified  by  his  signature. 
The  credit  will  be  issued  in  favour  of  two  or  more  persons  if 
desired. 

Such  orders,  when  used  by  travellers  in  the  same  country  as 
that  in  which  they  are  issued,  are  called  "  domestic  traveller's 
letters  of  credit,"  but  for  use  without  the  country  issuing, 
"  foreign  traveller's  letters  of  credit." 

Foreign  credits  enable  the  holders  to  obtain  the  money  cur- 
rent in  each  country  where  presented. 

There  are  also  "  commercial  letters  of  credit,"  which  are 
likewise  "  foreign  "  and  "  domestic,"  according  to  the  place 
in  which  desired.  These  are  issued,  if  "  foreign,"  payable 
in  the  money  current  in  the  country  where  desired  for  use, 
francs,  marks,  guilders,  etc.,  and  afford  the  merchant  or 
manufacturer  facility  and  protection  in  paying  for  purchases 
made  abroad.  They  are  issued  on  account  of  the  importer  and 
in  favour  of  the  shipper,  seller,  or  manufacturer,  in  foreign 
countries. 

For  example:  If  a  merchant  in  Boston  buys  merchandise 
in  Constantinople,  he  may  obtain  a  "  commercial  letter  of 
credit  "  for  the  sum  desired,  which  he  forwards  to  the  seller 
in  Constantinople,  and  that  person,  upon  presentation  in  his 
city  to  the  banking  house  designated  in  the  "  letter  of  credit," 
and  properly  identifying  himself,  may  obtain  the  sum  desired, 
but  generally  only  upon  presentation  with  the  "  letter  of 
credit  "  the  documents  showing  actual  shipment  of  the  goods. 

The  issuer  of  the  "  letter  of  credit  "  naturally  instructs  his 
correspondent,  that  the  latter  may  be  properly  advised. 

Letters  Testamentary.  An  instrument  issued  by  a  court 
authorizing  the  executor  under  a  will  to  perform  the  duties 
of  his  office. 

Levee  Bonds.  Particularly  issued  in  the  South  by  Levee 
Districts;  that  is,  municipal  subdivisions,  the  taxable  property 
therein  being  assessed  for  the  principal  and  interest  of  the 
debts.  These  bonds  are  issued  to  defray  the  expenses  of  build- 
ing and  maintaining  levees  for  the  reclamation  or  protection 
of  land  which  would  otherwise  be  submerged  by  water  all 
or  part  of  the  time.  Investors  should  look  into  one  of  these 
issues  very  carefully  before  purchasing.  The  wealth  of  the 
taxable  property  in  the  district,  the  necessity  of  the  levee  and 
the  probable  permanency  of  the  work,  are  deserving  of 


236  MONEY    AND    INVESTMENTS 

thoughtful  consideration.  A  levee  which  is  so  situated  and 
constructed  that  it  is  apt  to  be  easily  washed  away  is  by  no 
means  a  good  foundation  for  investment.  Some  of  these 
issues  have  proven  quite  satisfactory;  as  a  class  they  yield  a 
high  return  upon  the  investment. 

Level  Premium.  A  premium  determined  at  the  time  of 
taking  out  a  life  insurance  policy,  by  which  the  rate  of  pre- 
mium is  fixed  at  the  same  amount  per  annum,  based  upon 
the  age  of  the  insured. 

Liabilities.  All  debts  or  obligations  of  any  kind  to  pay 
money,  or  its  equivalent,  are  called  "  liabilities;  "  something 
owed. 

Capital  stock,  accounts  payable,  funded  and  floating  in- 
debtedness, surplus,  losses,  etc.,  all  appear  under  this  heading. 

Liability  Insurance.  This  is  a  subject  to  be  considered  by 
the  investor  regarding  certain  classes  of  securities.  A  street 
railway  may  be  earning  enough  to  pay  the  interest  on  its 
bonds  and  also  good  dividends  upon  its  stock;  in  other  words, 
may  be  looked  upon  as  a  corporation  in  good  financial  stand- 
ing. At  the  same  time,  a  serious  accident  may  occur,  causing 
a  loss  of  the  lives  of  many  passengers  and  the  injury  of  many 
others,  the  blame  for  which  may  rest  upon  the  railway  com- 
pany, necessitating  large  payments  in  the  way  of  damages. 
It  is  possible  that  the  amount  of  money  required  for  this 
purpose  may  not  only  be  equal  to  the  earnings  of  the  railway 
for  a  long  time  to  come,  but  actually  cause  financial  disaster 
to  the  company.1  There  are  companies  which  will  insure  a 
railway  to  a  limited  extent,  against  loss  resulting  from  acci- 
dent. The  expense  of  such  insurance,  however,  is  so  great 
that  comparatively  few  companies  can  afford  it.  The  majority 
of  railroads  are  such  large  corporations  that  the  loss  resulting 
from  any  one  accident  would  hardly  be  serious  enough  to 
embarrass  the  road,  so  that  in  this  connection  the  investor, 
as  a  rule,  need  only  consider  the  smaller  road.  In  the  latter 
case,  therefore,  in  lack  of  the  existence  of  liability  insurance, 
the  investor  must  take  into  consideration  the  physical  con- 
dition, grades,  curves,  construction,  etc.,  of  the  property. 
In  such  sections  of  the  country  where  it  is  possible  to  build 
long  stretches  of  road  practically  without  curves  and  appre- 
ciable grades,  the  danger  of  accidents  is  slight.  Bad  curves 

1  As  a  general  proposition,  unless  there  is  special  State  legislation  to 
the  contrary,  a  claim  for  damages  is  subservient  to  a  mortgage.    This  has 
been  shown  by  a  recent  decision  of  the  Supreme  Court  confirming  a  de- 
cision of  the  District  Court  in  a  Montana  case;  the  Court  holding  that  the 
section  of  the  statutes  of  that  State  which  provided  that  a  personal  injury 
claim  had  a  prior  right  over  a  mortgage  applies  only  to  railroads  of  com- 
merce and  not  street  railroads,  there  having  been  special  legislation  in  re- 
fird  to  the  former;   the  case  in  question  being  a  claim  against  the  Great 
alls  Street  Railway  Co. 


MONEY    AND    INVESTMENTS  237 

and  hills,  therefore,  are  very  important  things  to  consider  in  a 
street  railway  property,  for  not  only  do  they  count  in  con- 
sidering the  risk  of  an  accident,  but  the  cost  of  operation  in 
such  a  country  is  far  greater  than  in  one  with  more  favourable 
conditions. 

Gas  and  electric  light  companies  do  not  offer  a  great  risk  of 
accident  to  the  public  for  which  such  companies  can  be  held 
responsible;  at  least,  the  loss  resulting  from  any  one  such 
accident  would  probably  be  a  comparatively  small  matter, 
and  the  investor,  as  a  rule,  need  not  consider  "  liability  in- 
surance "  in  looking  into  that  class  of  investment.  As  a  matter 
of  fact  "  liability  insurance  "  is  quite  generally  carried  by 
gas  and  electric  light  companies. 

For  liability  in  event  of  accident  or  damage  in  relation 
to  vessel  property,  refer  to  "  Steamship  Company  Bonds." 

Many  corporations  carry  what  is  known  as  "  Employees 
Liability  Insurance,"  which  insures,  in  a  very  satisfactory 
way,  against  loss  to  the  company  on  account  of  accident  to 
its  employees  resulting  from  its  own  negligence.  This  class  of 
insurance  is  not  very  expensive  and  is  advisable. 

Liability  of  Shareholders.  Refer  to  "  Double  Liability  " 
and  "  Non-assessable." 

Lien.  A  claim  against  the  property  which  the  possessor 
may  retain  until  the  satisfaction  of  some  demand  or  a  debt 
due  him.  A  mortgage  is  a  "  lien."  "  Liens,"  however,  vary 
in  their  character.  One  may  hold  the  first  "  lien  "  against 
a  property  which  would  be  equal  to  holding  the  first  mort- 
gage; in  other  words,  nobody  has  a  prior  claim  against  it. 
A  "  second  lien  "  would  be  equal  to  a  second  mortgage  and  so 
on.  This  word  "  lien  "  has  been  used  in  such  ways  as  to 
confuse  the  investor.  There  was  an  issue  of  bonds  brought 
out  by  one  of  our  large  railroad  companies  some  years  ago, 
which  were  called  "  prior  liens,"  and  many  investors  assumed 
that  these  were  secured  by  a  mortgage  prior  to  any  other, 
while,  as  a  matter  of  fact,  this  was  not  the  case,  there  having 
been  another  issue  brought  out  previous  to  these,  and  there 
was  also  an  issue  which  came  after  the  "  prior  liens."  The 
"  prior  liens,"  so-called,  did  take  precedence  over  some 
other  obligation,  but  there  was  still  an  obligation  preceding 
them.  Many  investors  who  bought  these  bonds  without  this 
understanding  lost  money  thereby. 

Life  Annuity.  A  fixed  sum  of  money  payable  yearly  to  and 
during  the  life  of  the  person  or  persons  entitled  to  receive  the 
same. 

Life  Insurance.  Something  about  life  insurance  may  not 
be  amiss,  although  it  is  impossible  to  allow  much  space  for 
the  discussion  of  the  kind  of  insurance  most  desirable  or 


238  MONEY    AND    INVESTMENTS 

what  class  of  people  ought  to  be  insured,  etc.  The  one  point 
most  necessary  to  be  considered,  however,  is  the  company  or 
companies  in  which  to  insure.  Give  this  salient  fact  careful 
consideration,  namely,  do  not  be  influenced  too  strongly  by 
the  rate  of  dividends  earned  by  any  one  company  and  such 
like  inducements  brought  to  one's  attention  by  the  average 
insurance  agent,  but  look  into  the  plan  which  a  company 
pursues  in  the  investment  of  its  funds,  for  upon  their  safe 
investment  must  the  insured  depend  for  the  ultimate  payment 
of  his  policy.  Much  has  been  publicly  printed  of  late  regarding 
the  handling  of  investments  on  the  part  of  large  insurance 
companies  with  much  truth,  but  these  companies  are  solvent, 
and  insurance  in  them  is  safer  than  ever  before.  It  is  always 
possible  for  any  person  contemplating  insurance  to  obtain 
a  list  of  the  investments  of  companies  under  consideration, 
and,  in  lack  of  sufficient  knowledge  regarding  them,  to  dis- 
cuss the  list  with  some  competent  financial  advisor,  who,  at 
the  same  time,  may  be  able  to  give  desired  information  regard- 
ing the  character  of  the  men  in  control  of  the  company. 

"  Life  insurance  "  is  nothing  more  nor  less  than  depositing 
one's  money  in  a  savings  bank,  to  which  is  attached  the 
gambling  feature  of  the  company  that  the  insured  will  live  be- 
yond a  certain  period,  and  the  policy  holder  accepting  the 
wager,  and  betting  that  he  will  not.  If  there  were  any  way  of 
ascertaining  the  absolute  certainty  of  living  beyond  the  esti- 
mate placed  by  the  insurance  companies,  "  straight  life  in- 
surance "  would  be  useless.  For  the  privilege  of  betting  that 
you  will  not  live  beyond  a  certain  time,  and  upon  the  winning 
of  which  bet  your  estate  collects  the  amount  of  the  wager, 
you  are  asked  to  pay  an  excessive  charge.  The  cost  of  life 
insurance,' at  this  time  of  writing — 1906  —  is  far  greater 
than  it  should  be,  and  is  necessitated  particularly  by  the 
cost  of  soliciting  life  insurance  through  the  medium  of  agents. 
If  all  agency  work  could  be  done  away  with  the  cost  would 
be  much  lessened.  Some  persons  consider  that  it  is  against 
public  policy  to  solicit  life  insurance,  but  it  is  the  result  of 
undue  competition  in  business.  One  of  the  old  life  insurance 
companies  in  England  never  has  had  an  agent,  and  is  to-day 
a  prosperous  company.  It  is  very  likely  true,  as  the  insurance 
people  claim,  that  the  rates  of  that  company  are  no  lower 
than  obtainable  elsewhere,  because  the  new  business  secured 
is  not  great  enough  to  give  it  the  benefit  of  a  large  influx  of 
new  lives.  That  would  change,  nevertheless,  if  all  companies 
did  away  with  the  agency  feature.  However,  it  would  be 
somewhat  of  a  radical  revolution  to  expect  such  a  change  in 
the  conduct  of  this  business,  and  it  is  fair  to  say  that  the  very 
large  majority  of  life  insurance  companies  in  America  are 
sound,  and  that  a  policy  taken  in  the  same,  even  at  the 


MONEY    AND    INVESTMENTS  239 

present  excessive  cost,  is  not  only  safe,  but,  for  a  great  many 
people,  very  desirable.  In  this  connection  it  may  be  stated 
that  a  recent  law  has  been  passed  in  New  York  State  which 
compels  companies  doing  business  therein  to  limit  their 
expense  account.  This  will  correct,  to  quite  an  extent,  the 
excessive  cost  referred  to. 

It  is  not  the  object  here  to  discourage  life  insurance;  far 
from  it.  Rather  to  encourage  it;  but  there  are  many  instances 
when  it  is  unadvisable,  or  at  least  unnecessary,  and  possibly 
a  better  investment  of  one's  funds  might  be  made. 

While  the  cheapest  kind  of  companies  to  insure  in  are  the 
"  assessment  and  fraternal  insurance  "  companies,  they  have 
not  proved  the  most  satisfactory,  as  is  set  forth  under  the 
subject  in  quotations.  The  cheapest  kind  of  insurance  is 
"  term  insurance,"  so  called;  that  is,  the  insured  receives  the 
face  of  his  policy  only  in  case  of  death  before  the  expiration 
of  the  agreed  time;  for,  in  this  class,  the  only  expenses  which 
the  companies  need  to  figure  into  the  premiums  are  those 
resulting  from  death  losses  and  managerial  expenses.  But, 
as  policies  of  this  kind  are  usually  taken  out  to  cover  some 
particular  risk,  they  are  not  commonly  of  long  duration. 
For  the  benefit  of  one's  family,  a  "  term  insurance  "  policy 
with  renewable  features  is  an  inexpensive  and  desirable  form. 
The  "  level  premium  "  plan  is  the  best  for  a  man  upon  a  salary 
or  with  a  certain  yearly  income,  and  in  which  there  is  little 
likelihood  of  any  increase.  It  is  more  expensive  than  "  term 
insurance  "  at  the  start,  but  not  so  later  on. 

"  Endowment  insurance  "  is  well  worth  consideration  for 
those  who  can  afford  the  increased  cost;  as  it  not  only  carries 
the  feature  of  the  payment  of  its  face  value  in  case  of  death, 
but  returns  the  same  sum  at  the  end  of  the  endowment  period. 
To  that  extent  it  is  much  like  a  savings  bank.  "  Endowment 
insurance  "  encourages  an  enforced  saving,  and,  when  the 
policies  have  been  properly  selected,  has  proved  very  beneficial 
in  many  cases. 

From  the  standpoint  of  an  investment  alone  life  insurance 
is  absolutely  valueless.  Savings  banks  pay  better  rates  of 
interest.  There  must  be  other  reasons  for  insuring  than  the 
investment  feature  to  make  it  worth  the  while.  The  interest 
earned  may  be  a  secondary  consideration,  but  must  never  be 
a  first. 

Too  great  weight  should  not  be  attached  to  inducements 
frequently  advanced  by  the  agent,  such  as  the  amount  of 
money  which  his  company  will  loan  upon  a  policy;  its  "  cash 
surrender  value,"  etc.  The  value  of  such  privileges  depends 
entirely  upon  the  person,  whether  or  no  he  is  likely  to  abuse 
the  same.  Some  men  actually  need  the  incentive  which  the 
lack  of  these  privileges  would  compel  in  order  to  encourage 


240  MONEY    AND    INVESTMENTS 

the  savings  necessary  to  meet  premium  payments.  Looking 
at  it  from  the  standpoint  of  one's  family,  an  insurance  policy 
which  neither  permits  one  to  borrow  nor  obtain  a  "  cash 
surrender  value  "  upon  it,  is  probably,  in  many  instances,  the 
most  desirable. 

Lift  Prices.    "  Prices  were  lifted;  "  forced  up  unnaturally. 

Limelight.    In  the  light  of  a  searching  public  investigation. 

Limit.  A  price  which  a  broker  must  not  go  beyond  in 
executing  an  order  for  his  customer.  "  His  limit  to  buy  was 
63."  The  broker  had  no  right  to  fill  the  order  at  a  price  in 
excess  of  63.  The  word  "  limit  "  might  also  be  used  in  re- 
stricting the  amount  to  be  purchased  or  sold. 

Limited  (or  Limited  Company).  Limited  liability.  "  Lim- 
ited "  signifies  that  by  law  the  shareholders  are  exempt  from 
personal  liability  beyond  the  amount  already  invested.  (See 
"  Double  Liability.") 

Limited  Legal  Tender.  (First  read  "  Legal  Tender.") 
Money  which  has  "  legal  tender  "  qualities  only  to  a  certain 
amount.  Example:  Our  twenty-five  cent  silver  pieces  may 
be  used  in  the  settlement  of  a  debt  up  to  $10;  i.  e.  they  are 
"  legal  tender  "  only  to  the  amount  of  $10  in  any  one  payment. 

Limited  Partnership.  Burdick,  in  his  "  Essentials  of  Busi- 
ness Law,"  says  that  the  idea  of  a  "  limited  partnership  " 
was  borrowed  from  the  French,  and  first  introduced  in  this 
country  in  1822  by  the  Legislature  of  New  York. 

Such  partnership  must  consist  of  at  least  one  member  fully 
liable  for  all  debts  of  the  firm  and  who  is  likewise  a  manager 
of  the  business.  In  addition  there  are  one  or  more  "  special 
partners  "  taking  no  active  management  of  the  business,  and 
who  are  limited  for  the  indebtedness  of  the  firm  up  to  only 
the  amount  contributed  to  capital. 

Limping  Standard.  A  country  which  at  one  time  em- 
ployed the  double  standard  of  gold  and  silver,  but  has  sus- 
pended the  free  coinage  of  silver  in  order  to  keep  its  silver 
coins  at  par  with  gold,  is  considered  to  have  a  "  limping 
standard "  (Etalon  Boiteaux),  because  silver  limps  along 
behind  gold  without  being  subject  to  free  coinage.  Countries 
which  are  not  practically  upon  the  "  gold  standard  "  are 
not  usually  classified  as  under  the  "  limping  standard-"  If 
their  coins  are  not  at  par  with  gold,  they  are  treated  as  on  the 
"  silver  standard."  1 

Line.  "He  carries  a  good  line  of-  —stock;"  "line" 
here  meaning  special  kind.  "  Line  "  is  also  used  to  denote  a 
certain  amount  of  securities  carried  more  or  less  continually 

1 1  am  indebted  to  Mr.  Charles  A.  Conant  for  assistance  in  framing  this 
definition. 


MONEY    AND    INVESTMENTS  241 

as  "  a  line  of  10,000  shares."  A  "  line  "  of  road  indicates  a 
railroad. 

Linseed  Oil.     American  Linseed  Co. 

Liquid  Assets.  Money,  or  property  of  all  kinds,  which  may 
be  readily  converted  into  money.1 

Liquidated  Damages.  Damages  fixed  upon  in  advance  by 
the  parties  to  a  contract  as  the  amount  which  shall  be  re- 
coverable upon  a  breach  of  the  contract. 

Liquidating  Market.  As  commonly  understood,  a  market 
in  which  a  great  many  are  selling  securities;  taking  their 
profits,  as  it  were,  naturally  resulting  in  declining  prices.  Or 
the  "  short  interests  "  may  be  forced  to  "  cover."  Such  a 
market  is  naturally  the  result  of  an  excessive  buying  or 
"  short  selling." 

Liquidation.  This  is  used  in  two  ways.  In  one  case,  it  means 
the  winding  up  of  a  business,  the  converting  of  its  assets  into 
cash,  etc.;  in  the  other,  it  is  used  in  reference  to  the  stock 
exchange  when  holders  of  stock  are  selling,  converting  the 
same  into  money. 

"  Liquidation  of  speculative  accounts  "  indicates  that  those 
who  were  speculating  decided  to  close  out  their  accounts. 

"  Liquidation  "  in  either  of  the  above  examples  may  be 
"  voluntary  "  or  "  forced." 

When  a  speculator  who  has  been  "  long  "  sells  out  at  a  loss, 
he  has  "  liquidated." 

Liquid  Resources.     See  "  Liquid  Assets." 

Lira.  An  Italian  silver  coin  equal  in  value  to  the  French 
franc,  or  $.193  in  United  States  money. 

List.  "  Sold  the  list  generally."  An  expression  used  in 
reference  to  general  transactions  in  many  different  securities 
listed  upon  the  stock  exchange;  a  general  selling  of  most 
listed  securities  rather  than  the  transactions  of  the  day  being 
confined  to  a  few  different  ones.  The  "  list  "  refers  to  the 
securities  which  may  be  dealt  in  upon  the  stock  exchange,  and 
a  list  of  which  is  established  in  each  exchange. 

The  corresponding  term  for  the  London  Stock  Exchange  is 
"  official  list." 

Listed  (or  Listed  Securities).  Each  stock  exchange  has 
certain  rules  which  must  be  complied  with  before  a  security 
may  be  traded  in  thereon.  There  must  be  submitted  to 
certain  officers  of  an  exchange  a  description  of  the  security  in 
such  a  tangible  form  that  any  one  may  satisfy  himself  as  to 
every  detail  and  particular  of  the  property  represented. 

1  W.  W.  Carlile  thinks  that  "  liquidity  "  as  applied  to  assets  "  can  mean 
nothing  else  but  the  possession  of  a  value  that  is  not  liable  to  fluctuate."  — 
"  Economic  Method  and  Economic  Fallacies." 


242  MONEY    AND    INVESTMENTS 

Furthermore,  at  regular  intervals  there  must  be  furnished  a 
statement  of  the  financial  condition  and  earnings  of  each 
company  whose  securities  have  been  listed.  In  the  New  York 
Stock  Exchange  there  is  a  "Stock  List  Committee,"  which 
receives  and  considers  all  applications  for  placing  securities 
upon  the  "  list  "  of  the  exchange,  and  makes  report  and 
recommendation  thereon  to  the  "  Governing  Committee," 
giving  full  statement  of  earning,  organization,  capitalization, 
resources  and  indebtedness.  This  committee  has  charge  of 
the  arrangement  and  revision  of  the  regular  "  list  "  of  securi- 
ties. "  Listed  "  securities,  therefore,  have,  to  a  certain  extent, 
the  approval  of  the  exchange,  and  it  is  understood  that  the 
corporations  which  they  represent  are  furnishing  to  the  ex- 
change sworn  statements  of  their  financial  condition  and 
earnings  as  required. 

The  investor  or  speculator  must  not  be  deluded,  however, 
into  believing  that  just  because  a  security  is  "  listed  "  upon  an 
exchange,  it  follows  that  it  is  any  better  than  some  other 
security  not  so  favoured.  "  Listing  "  simply  means  that  facts 
and  figures  in  relation  to  the  security  are  given  more  or  less 
publicity;  that  is,  are  available  to  the  public;  but  the  stock 
exchange  in  no  way  stand  sponsor  for  the  intrinsic  merits 
of  any  security  "  listed  "  thereon. 

Listed  Department.  "  Listed  "  securities  as  distinguished 
from  "  unlisted."  (See  those  subjects.) 

Little.  Common  stock.  (See  next  two  subjects  for  ex- 
amples.) 

Little  Npr.  (Nipper).  Northern  Pacific  R.  R.  Co.  common 
stock. 

Little  Union.    Union  Pacific  Railway  Co.  common  stock. 

Live  Assets.  Investments  upon  which  interest  has  been  or 
is  expected  to  be  paid  as  due,  or  income-producing  property. 

LL.    The  "  ticker  "  abbreviation  for  "  leased  lines." 

Loading.  A  term  used  in  life  insurance  company  offices. 
A  life  insurance  premium  may  be  divided  into  three  parts. 
The  "  actuary  "  figures  what  sum  is  necessary  to  cover  the 
mortality  losses  and  the  amount  necessary  for  "  reserve." 
In  addition  to  these  two  factors,  must  be  considered  the 
amount  to  cover  the  expenses  of  the  company.  This  is  the 
"  loading;  "  being  that  part  of  the  premium  which  can 
properly  be  applied  to  the  company's  expenses. 

Load  Up.  To  purchase  a  great  deal  of  anything.  You  load 
up  with  a  certain  stock  when  you  buy  nearly  or  fully  up  to 
your  capacity.  "  He  is  loaded."  This  may  mean  the  same  as 
the  last  or  may  mean  that  he  has  too  much  of  an  undesirable 
security,  of  which  it  is  impossible  to  dispose,  except  at  a  loss. 


MONEY    AND    INVESTMENTS  243 

Loan  and  Trust  Company.    See  "  Trust  Company." 

Loan  Certificate.  A  short  term  for  "  Clearing-House  Loan 
Certificate." 

Loan  Crowd.  Those  brokers  who  have  stocks  to  lend  or  who 
wish  to  borrow  them.  Refer  to  "  Borrowing  Stock." 

Loaned  Stock.     See  "  Borrowing  Stock." 

Loaning  Rate  on  Stocks.    See  "  Borrowing  Stocks." 

Local  Check.  Although  "  local  check  "  in  clearing-house 
parlance  would  naturally  indicate  a  check  on  some  bank  be- 
longing to  the  clearing-house  association,  in  some  instances, 
it  is  used  in  the  same  sense  as  an  "  out-of-town  check,"  or  a 
check  on  some  country  bank. 

Locked  Up.  Money  is  said  to  be  "  locked  up  "  when  it  is 
not  available  for  immediate  use.  Money  that  is  "  locked  up  " 
is  not  necessarily  ill-invested,  as  it  may  be  in  such  form  that 
it  is  not  adapted  to  other  uses. 

When,  however,  money  is  said  to  be  "  tied  up,"  it  conveys 
an  idea  of  insecurity,  as  that  of  a  depositor  in  a  bank  in 
process  of  forced  liquidation. 

Locomotive.     American  Locomotive  Co. 

Lombard  Street.1  Lombard  Street  as  used  with  us  has  much 
the  same  general  significance  as  our  own  term  "  Wall  Street  " 
(which  read),  but  to  quote  the  words  of  a  well-known  London 
man  of  finance: 

"  The  terms  in  London,  which  most  nearly  correspond  to 
'  Wall  Street '  in  New  York,  would  be  '  Capel  Court '  and 
'  Throgmorton  Street/  '  Lombard  Street '  and  '  Threadneedle 
Street/  referring  more  particularly  to  the  banking  element  of 
our  city,  whereas  the  Stock  Exchange  and  its  associations 
are  more  correctly  described  by  the  former." 

Bagehot,  writing  of  Lombard  Street  in  1873,  said  "  that  it 
is  by  far  the  greatest  combination  of  economical  power  and 
economical  delicacy  that  the  world  has  ever  seen.  .  .  . 
Money  is  economical  power." 

One  English  financier  —  W.  R.  Lawson  —  says  of  Lombard 
Street:"  .  .  .  meaning  thereby  the  clearing  banks  of  London, 
the  discount  houses,  the  bill  brokers,  and  all  the  moneyed 
interests." 

London  Equivalent.  Read  "  New  York  Equivalent," 
which  applies  here,  transposing  the  two  cities. 

London  Money.  Rates  asked  for  "  call  "  and  "  time  " 
money  in  that  city. 

1  This  Street  received  its  name  from  the  Lombards  —  Italian  merchants 
from  the  republics  of  Genoa,  Lucca,  Florence  and  Venice  —  who  carried 
on  the  business  of  banking,  and  who,  previous  to  the  expulsion  of  the  Jews, 
settled  in  England. 


244  MONEY    AND    INVESTMENTS 

London  Orders.  London  time  is  five  hours  later  in  the  day 
than  New  York  "  standard  time."  That  is  to  say,  the  sun  rises 
about  five  hours  earlier  at  London  than  it  does  at  New  York. 

The  London  stock  exchange  opens  at  11  o'clock  A.  M., 
London  time,  and  closes  at  4  p.  M.,  except  that  it  remains 
open  one  half  hour  longer  on  "  account  days."  London  re- 
ceives the  first  New  York  quotations  just  after  3  o'clock  in  the 
afternoon,  and,  when  the  New  York  Stock  Exchange  opens, 
the  day's  business  is  nearly  finished  in  London,  as  10  A.M.  in 
the  former  equals  3  P.  M.  in  London.  Therefore,  New  York 
receives  the  entire  day's  London  quotations  during  the  fore- 
noon, and  the  majority  of  them  before  the  opening  of  its  own 
exchange. 

The  commission  for  buying  or  selling  American  stocks  in 
London  is  at  the  rate  of  about  $12.50  per  100  shares  or  6d. 
per  share.  This  is  also  the  commission  charged  for  the  pur- 
chase of  "  options." 

American  securities  are  paid  for  in  London  in  pounds  ster- 
ling, regardless  of  the  rate  of  exchange,  at  an  unchangeable 
fixed  rate:  $5  to  £1.  Example:  100  shares  at  $50  would 
amount  to  $5,000,  the  London  payment  being  100  pounds 
sterling.  An  American  order  sent  during  the  afternoon  or 
evening  is  understood  to  be  "  good  in  London  "  until  2  P.  M. 
(about  9  A.  M.  New  York  time)  the  following  day,  unless 
otherwise  stated,  permitting  the  receipt  of  an  answer  before 
the  opening  in  New  York.  Likewise,  orders  sent  during  the 
day  are  understood  to  be  "  good  in  London  "  the  balance  of 
that  day. 

The  London  variations  in  prices  are  allowed  by  "  six- 
teenths," whereas  on  the  New  York  Exchange  they  must  not 
be  at  lesser  intervals  than  "  eighths." 

Stock  deliveries  in  London  are  usually  made  in  certificates 
of  ten  shares  each. 

Arrangements  for  shipping  securities  sold,  or  receiving 
securities  purchased,  on  the  London  Stock  Exchange,  are  best 
arranged  for  through  a  banking  house,  charges  being  made  for 
shipping  expenses,  insurance,  and  interest  on  the  money  in- 
volved while  the  securities  are  in  transit. 

London  Quotations.  These  differ  from  ours,  as  we  give  the 
number  of  shares,  etc.,  traded  in,  and  the  prices  realized,  but 
in  London  only  the  bid  and  asked  prices  are  given.  (See 
"  New  York  Equivalent.") 

The  stock  exchange  quotations  are  given  in  fractions  of  one 
pound  in  this  manner: 

Shillings    Pence 
1-32  =0  7* 

1-16  =1  3 

3-32  =          1  10* 

7-8    =17  6      And  so  on. 


MONEY    AND    INVESTMENTS  245 

London  Settlement.    See  "  Fortnightly  Settling-Days." 

London  Stock  Exchange  Transactions.  A  brief  sketch  of  how 
"  bargains,"  as  the  English  call  them,  are  transacted  upon  the 
London  Stock  Exchange  may  be  of  interest. 

In  the  first  place,  in  London  there  are  two  classes  of  brokers: 
The  "  outside  broker,"  who  may  or  may  not  be  a  responsible 
party,  the  term  including  what  we  know  as  "  bucket  shop 
brokers,"  "  curb  brokers,"  or,  in  fact,  any  broker  not  an 
accredited  member  of  the  exchange.  The  "  inside  broker  " 
who  belongs  to  the  stock  exchange,  members  of  which  are  not 
allowed  to  advertise  for  business. 

Let  us  suppose  that  an  order  is  given  one's  broker  to  buy 
and  sell  a  security.  He  goes  to  the  stock  exchange.  If  the 
security  happens  to  be  one  of  the  English  railway  shares  he 
goes  to  what  is  known  as  the  "  Home  Railway  Market;  " 
which  is  a  particular  part  of  the  exchange  where  securities 
of  that  class  are  dealt  in,  not  making  it  necessary  to  wander 
all  over  the  building  to  find  some  one  who  deals  in  the  security 
sought.  The  broker  goes  to  the  "  dealer "  or  "  jobber," 
meaning  one  and  the  same,  who  correspond  much  to  the  whole- 
sale merchants  in  commerce.  The  broker  will  ask  the  jobber 
to  name  a  price  on  the  security,  without  telling  whether  a 
purchase  or  sale  is  desired.  The  jobber  may  refuse  to  make 
him  a  price  if  he  sees  fit,  but  if  a  price  is  named  he  is  bound  by 
the  rules  of  the  stock  exchange  to  buy  or  sell  the  security 
referred  to  at  the  option  of  the  broker.  Thus  two  prices  are 
always  named  by  the  jobber,  one  at  which  he  will  sell  and  the 
other  at  which  he  will  buy,  which  explains  why  the  news- 
papers give  two  quotations,  as,  for  instance,  128^  —  129, 
meaning  that  the  lesser  price  is  the  one  at  which  the  jobber 
will  buy,  and  the  higher,  at  which  he  will  sell.  The  half  of  one 
per  cent,  represents  the  jobber's  profit  and  is  called  the 
"  jobber's  turn."  As  he  has  to  buy  or  sell  at  his  own  risk  — 
close  one  transaction  before  closing  the  other  —  he  naturally 
demands  a  larger  percentage  than  would  our  American  broker, 
who  buys  and  sells  on  orders.  The  London  jobber,  after 
naming  a  price  at  which  he  will  sell  a  stock,  must  take  his 
chances  upon  buying  from  another  jobber  at  a  price  which 
will  show  him  a  profit.  When  the  newspapers  give  but  one 
price,  that  is  termed  the  "  middle  price,"  by  which  it  is  under- 
stood that  the  buying  or  selling  prices  must  be  respectively  a 
little  more  than  or  a  little  less  than  the  price  given  if  a  trans- 
action is  desired. 

After  the  "  bargain  "  is  completed,  the  broker  will  wish  to 
know  when  payment  is  to  be  effected.  If  the  customer  desires 
to  pay  cash  for  a  purchase,  that  may  be  done  at  once,  or,  if 
not,  he  may  wish  to  carry  it  forward  to  the  next  settlement, 
which  is  the  usual  custom.  Purchases  for  cash  call  for  slightly 


246  MONEY    AND    INVESTMENTS 

higher  prices  than  the  current  quotations,  hence  it  is  rather 
better  to  buy  for  the  settlement.  This  method  of  completing 
transactions  is  explained  under  "  Fortnightly  Settling- 
Days."  1  (See  also  "  London  Orders.") 

"  Bargains  in  Bonds  and  Debentures  include  the  accrued 
interest  in  the  price,  except  in  the  case  of  British  and  Colonial 
Treasury  and  Exchequer  Notes  or  Bills,  Rupee  Paper,  Indian 
Railway  Debentures,  and  certain  Securities  of  a  like  char- 
acter, which  are  dealt  in  so  that  the  accrued  interest  up  to  the 
day  for  which  the  Bargain  is  done  is  paid  by  the  Buyer."  2 

Long.  To  be  "  long  "  of  a  security  means  to  own  more 
than  you  have  contracts  to  deliver.  If  a  person  owns  100 
shares  of  Union  Pacific  stock  more  than  he  has  sold,  he  is 
"  long  "  on  that  stock.  The  word  is  used  to  denote  ownership 
merely  as  the  opposite  of  the  word  "  short,"  which  is  fully 
explained  under  the  heading  "  Selling  Short."  One  often 
reads  such  a  sentence  as:  "  Much  long  stock  came  out," 
meaning  there  was  plenty  offered  for  sale,  and  holders  were 
taking  their  profits.  When  "  bulls  "  have  been  buying  they 
are  "  long."  Those  who  are  "  long  "  have  bought  in  expecta- 
tion of  an  advance  in  price. 

Long  Account.  (First  read  "  Long.")  This  refers  to  the 
purchases  of  all  those  who  have  bought  a  certain  security,  or 
it  may  refer  to  purchases  in  general  without  regard  to  any 
particular  security.  The  "  long  account  "  naturally  includes 
the  "  bulls." 

Long  Bills.  "  Time  bills  "  of  "  exchange  "  for,  say,  60  or 
90  days,  or  some  other  long  period.  (See  subjects  in  quota- 
tions.") 

Long  Interest.  (First  read  "  Long.")  All  those  who  are 
"  long  "  of  any  or  all  securities. 

Long  Island.  Long  Island  R.  R.  Co.  Controlled  by  the 
Pennsylvania  R.  R.  Co.,  through  an  ownership  of  the  majority 
of  its  stock. 

Long  Market.  An  overbought  condition  existing;  too 
many  have  been  executing  contracts  for  purchase,  the  result 
of  which  will  naturally  be  a  decline  in  prices. 

Long  Pull.  A  purchase  of  a  security  with  the  expectation 
of  holding  it  for  a  considerable  duration  of  time;  or  "  selling 
short,"  anticipating  that  that  position  will  have  to  be  main- 
tained for  a  long  period. 

Long  Rate.  (As  used  in  fire  insurance.)  A  rate  is  based  on 
a  year's  period  of  time.  A  long  rate  is  so  called  when  the 

1  For  much  of  the  above  information  I  am  indebted  to  W.  W.  Wall's 
excellent  book  "  British  Railway  Finance." 

2  Rules  and  Regulations  of  the  London  Stock  Exchange  —  1906. 


MONEY    AND    INVESTMENTS  247 

period  is  more  than  one  year,  as  for  three  years  it  is  twice  the 
annual  rate  and  for  five  years  three  times  the  annual  rate. 

Long  Side.  "  Too  much  pressure  on  the  long  side."  By  an 
understanding  of  "  long,"  it  will  be  seen  that  the  foregoing 
expression  has  reference  to  the  fact  that  there  has  been  too 
great  a  buying  of  securities,  and  a  desire  to  dispose  of  the  same 
becomes  apparent,  resulting  in  a  tendency  to  a  decline  in 
prices.  An  overbought  market  would  have  the  same  mean- 
ing. 

Long  Sterling.  "  Time  bills  "  of  "  exchange  "  on  London 
for,  say,  60  or  90  days,  or  some  other  long  period.  (See  sub- 
jects in  quotations.) 

Long  Stock.    See  "  Long." 

Loss.  When  a  security  is  sold  for  less  than  cost  or  de- 
preciates in  value  below  cost;  when  a  business  at  the  end  of  a 
stated  period  has  incurred  a  cost  of  operating  greater  than  the 
receipts,  the  business  has  been  run  at  a  "  loss." 

Lost  Stock  Certificates,  Bonds,  Etc.  See  "  Care  of  Securi- 
ties." 

Lottery  Bonds.  Bonds  which  may  be  drawn  by  lot  at  some 
date  earlier  than  the  actual  maturity  specified  in  the  face  of 
the  security,  or  such  securities  as  referred  to  in  "  Premium 
Bonds  "  might  be  considered  as  "  lottery  bonds." 

Louis.  A  "  gold  Louis  "  ("  Louis  d'or  ")  is  the  French 
twenty-franc  piece.  It  was  first  coined  in  1640  during  the 
reign  of  Louis  XIII.  The  modern  twenty-franc  piece  is  called 
a  "  Napoleon." 

Louisiana  Purchase  Exposition  Dollar.  United  States  gold 
dollars  of  special  design  minted  during  1902  and  1903  in 
recognition  of  the  St.  Louis  World's  Fair,  total  amount  coined, 
$250,258  of  standard  weight  and  fineness. 

Louisville  and  Nashville.    Louisville  &  Nashville  R.  R.  Co. 

L.  s.  d.  The  signs  used  in  Great  Britain  for  "  pounds," 
"  shillings,"  and  "  pence." 

Lying  Down.  A  refusal  to  meet  one's  agreements  or  con- 
tracts. 

M 

Mackay.  Mackay  Companies.  A  "  voluntary  associa- 
tion "  owning  the  Commercial  Cable  Co.,  and  other  similar 
properties. 

Maine.     Boston  &  Maine  R.  R.  Co. 

Maine  Central.    Maine  Central  R.  R.  Co. 

Maintenance  of  Equipment.     A  heading  of  an  account  as 


248  MONEY    AND    INVESTMENTS 

exhibited  in  the  operating  statement  of  the  earnings  of  a 
railroad  and  should  include,  as  determined  by  the  Interstate 
Commerce  Commission,  all  renewals  and  repairs  to  rolling 
stock,  marine  equipment  if  any,  as  well  as  shop  machinery, 
tools,  etc.,  superintendence,  stationery,  printing,  and  other 
expenses  incurred  in  relation  thereto. 

Maintenance  of  Way  and  Structure.  This  heading  is  often 
seen  under  the  "  Operating  Expenses  "  of  a  railroad  company 
and,  as  classified  by  the  Interstate  Commerce  Commission, 
includes  the  following:  Repairs  of  roadway,  renewals  of  rails 
and  ties,  repairs  and  renewals  of  bridges,  culverts,  fences, 
road  crossings,  signs,  cattle  guards,  buildings  and  fixtures, 
docks,  wharves  and  telegraph,  stationery  and  printing  in 
connection  with  the  foregoing;  also  minor  expenses  referred 
to  as  "  Other  Expenses,"  which  go  to  preserve  a  good  physical 
condition  of  the  line  of  road. 

Maker.    The  person  who  signs  a  note,  draft,  etc. 

Making-Up  Day.  The  first  of  the  "  fortnightly  settling- 
days,"  which  subject  see,  as  well  as  "  Contango  Day." 

Making-Up  Price.  To  understand  this,  it  is  necessary 
to  read  "-Stock  Exchange  Clearing-House."  "  Making-up 
price  "  is,  with  us,  what  is  referred  to  under  that  heading  as 
the  "  delivery  price." 

In  London  this  term  has  reference  to  the  price  at  which  a 
security  is  carried  over  to  the  next  settlement,  as  explained 
under  "  Contango."  The  price  at  which  some  one  else  who  is 
willing  to  furnish  the  stock,  for  example,  sells  it  to  him,  for 
immediate  delivery,  and  buys  it  in  again  for  the  next 
(new)  account,  is  the  "  making-up  price." 

The  "  making-up  prices  "  are  fixed  at  the  hour  of  noon,  on 
what  is  known  as  "Contango  Day  "  (to  which  subject  refer), 
by  an  official  of  the  London  Stock  Exchange. 

On  the  following  day,  which  is  "  Ticket-Day,"  "  making-up 
prices "  are  again  fixed  by  which  all  unsettled  bargains 
on  the  following  day  —  "  Account-day  "  —  for  securities 
which  pass  "  by  delivery,"  as  it  is  called,  shall  be  brought 
down  and  temporarily  adjusted.  This  also  applies  to  securi- 
ties which  pass  by  "  deed  of  transfer,"  except  bargains  in 
securities  subject  to  arrangement  by  the  "  Settlement  Depart- 
ment," which  are  temporarily  adjusted  at  the  "  making-up 
price  "  of  the  Contango  Day. 

M  and  N.  Interest  or  dividends  payable  semi-annually, 
May  and  November. 

M  and  S.  Interest  or  dividends  payable  semi-annually, 
March  and  September. 

M.  A.  N.  F.  May,  August,  November,  February;  interest 
or  dividends  payable  quarterly,  beginning  with  May. 


MONEY    AND    INVESTMENTS  249 

Manhattan.  Manhattan  Ry.  Co.,  of  New  York  City. 
Leased  to  the  Interborough  Rapid  Transit  Co. 

Manifest.  The  invoice  of  a  ship's  cargo,  and  the  names  of 
the  party,  or  parties,  to  whom  it  is  destined. 

Manipulation.  Putting  up  prices  by  virtue  of  ability  to  do 
so;  tempting  the  public  by  the  "  insider"  to  the  end  that 
shares  may  become  the  property  of  the  unwary  ones  who 
fancy  they  are  becoming  partners  with  the  "  insider."  The 
art  consists  of  making  others  think  they  are  getting  your 
money  while  in  reality  you  are  getting  theirs.  In  the  "  manip- 
ulation "  of  the  stock  market,  prices  may  be  made  to  change, 
not  in  the  direction  in  which  a  legitimate  investor  would 
naturally  expect,  judging  from  existing  conditions,  but  in  the 
direction  in  which  it  will  best  serve  the  interests  of  a  particular 
person  or  group  of  persons.  The  market  is  then  said  to  be 
"  manipulated." 

Business  prosperity  and  low  money  rates  favour  the  "manip- 
ulator." 

Dow  says:  "  Generally  speaking,  manipulation  in  a  new 
property  is  for  the  purpose  of  selling;  in  an  established  prop- 
erty, bull  manipulation  is  usually  discounting  some  favourable 
news  which  insiders  are  holding  back.  Bear  manipulation 
.  .  .  discounting  something  which  is  unfavourable. 

"  In  a  broad  sense,  trading  on  the  Stock  Exchange  repre- 
sents the  operation  of  supply  and  demand  as  applied  to 
securities.  Ordinarily,  however,  a  comparatively  small  part 
of  the  business  is  done  by  investors.  The  larger  part  is  the 
outcome  of  professional  trading  and  o"f  the  manipulation 
that  is  carried  on  by  large  interests  to  accomplish  desired 
results." 

In  the  words  of  Nelson,  "  He  will  issue  buying  and  selling 
orders  in  the  same  stock  at  the  same  time,  and  cover  his 
tracks  with  the  skill  of  an  Indian." 

"  Wash  sales  "  and  "  matched  orders  "  are  some  of  the 
artifices  which  the  manipulator  makes  use  of. 

Manual  Exchange.  In  relation  to  investments,  the  actual 
exchange  of  one  security  for  another.  A  practical  illustration 
would  be  the  case  of  a  city,  limited  by  law  to  a  certain  in- 
debtedness; such  limitation  practically  having  been  reached, 
and  an  issue  of  the  bonds  maturing  which  the  city  wishes  to 
replace  (refund)  by  another  issue.  To  sell  the  new  issue  and 
with  the  proceeds  take  up  the  old,  might,  for  the  time  being, 
result  in  the  city's  exceeding  its  debt  limitations,  thereby 
invalidating  the  new  issue  of  bonds.  In  order  to  overcome 
this  point,  the  new  bonds  must  be  exchanged  for  the  old, 
proper  affidavit  being  taken  certifying  to  the  fact.  By  this 
method  the  two  issues  are  not  outstanding  at  the  same  time, 


250  MONEY    AND    INVESTMENTS 

and  a  "  manual  exchange  "  of  the  securities  has  been  ac- 
complished. 

Manufacturing  Aid  Bonds.    See  "  Railroad  Aid  Bonds." 

Maple  Leaf.    Chicago  Great  Western  Railway  Company. 

Margin.  "  Buying  stocks  upon  a  margin,"  —  a  much  used 
expression  and  a  much  abused  custom.  One  of  the  dictionary 
meanings  for  "  margin  "  is  an  edge  or  border,  and  from  that 
has  arisen  its  use  in  stock  exchange  transactions,  meaning 
the  difference  between  the  actual  amount  of  money  paid  for  a 
given  security  and  the  amount  which  the  broker  is  willing  to 
furnish  to  his  customer  towards  "  carrying  "  it.  To  be  more 
explicit,  let  us  take  an  example:  A  man  with  about  a  thousand 
dollars  desires  to  purchase  as  much  of  a  certain  stock,  selling, 
say,  at  $100  a  share,  as  possible.  If  he  were  to  buy  the  stock 
outright  and  receive  delivery  of  a  certificate  he  could  only 
buy  ten  shares,  but  by  going  to  a  broker  who  does  a  "  mar- 
ginal business,"  so-called,  he  can  largely  increase  the  number 
of  shares  purchased.  The  broker  would  probably  buy  one 
share  of  stock  for  each  $10  offered  by  the  customer.  A 
thousand  dollars,  therefore,  would  furnish  sufficient  margin 
for  the  purchase  of  one  hundred  shares.  The  actual  trans- 
action in  a  legitimate  broker's  office  is,  that  he  purchases 
one  hundred  snares  of  stock,  we  will  say,  at  $100  a  share; 
charging  the  client  the  regular  commission  for  buying.  The 
stock  is  delivered  to  the  broker  made  out  in  his  name,  not  in 
the  client's,  or  "  transferred  in  blank,"  and  it  is  held  as  col- 
lateral security,  so  to  speak,  for  the  loan,  which  is  really 
what  it  amounts  to.  It  is  understood  that  the  customer  will 
furnish  more  money  in  case  of  a  market  decline  in  the  price, 
so  that  the  difference  of  $10  per  share  between  the  market 
value  of  the  stock  and  the  amount  loaned  thereon  to  the 
client  by  the  broker  shall  always  be  approximately  main- 
tained. If  the  stock  declines  five  points,  for  example,  the 
broker  would  naturally  call  upon  the  client  for  a  further  deposit 
of  five  dollars  per  share,  or  $500.  If  the  money  is  not  forth- 
coming, the  broker  would  avail  himself  of  his  privilege  of 
selling  the  stock  before  the  margin  was  entirely  exhausted. 
The  transaction  would  be  closed  with  the  client,  as  follows: 

Original  cost  of  stock  plus  buying  commission  $10,012.50, 
selling  stock  at,  say,  95,  less  selling  commission  of  $12.50  — 
$9,487.50.  Loss  in  transaction,  $525,  which  would  leave  to 
be  returned  to  the  client  out  of  his  margin  of  $1,000  - 
$475,  less  also  the  amount  of  interest  charged  by  the  broker 
upon  the  money  furnished  during  the  transaction. 

Had  the  stock  advanced  in  price  and  been  sold  at  a  profit, 
there  would  have  been  no  calling  for  a  further  deposit  of  cash 
from  the  customer,  and  all  would  have  ended  happily. 


MONEY    AND    INVESTMENTS  251 

The  idea  of  buying  upon  a  "  margin  "  is,  that  with  a  given 
amount  of  money  a  greater  number  of  shares  of  stock  can  be 
purchased  than  as  if  bought  outright;  therefore,  if  the  stock 
advances,  there  is  a  greater  profit.  The  unfortunate  side  is, 
however,  that  if  the  stock  declines  the  loss  is  also  proportion- 
ately large. 

This  is  one  of  the  features  of  so-called  stock  gambling,  and 
where  it  hits  the  hardest  is  on  the  part  of  persons  who  have  not 
sufficient  reserve  capital  to  take  up  and  pay  for  the  stock  in 
case  of  a  decline,  and  when  it  might  seem  desirable  to  take  the 
stock  outright  by  paying  the  broker  the  entire  amount  of  the 
loan,  and  thus  wait  for  a  more  favourable  time  when  it  might, 
again,  be  sold  at  cost  or  possibly  a  profit.  Take  it  when  a 
stock  has  rapidly  declined  in  price  on  account  of  some  political 
unrest,  or  for  a  cause  of  lesser  moment,  when  the  decline  is 
really  no  reflection  whatsoever  upon  the  intrinsic  value  of  the 
security;  it  is  in  such  cases  where  there  is  no  reserve  capital 
that  "  margins  "  are  actually  "  wiped  out,"  as  the  expression 
goes,  and  the  speculator  is  perhaps  seriously  distressed. 

There  is  "  marginal  buying  "  on  the  part  of  people  of  large 
means  who  are  at  any  moment  prepared  to  take  up  and  pay 
for  the  securities  in  case  of  necessity,  but  whose  money,  per- 
haps, at  the  time  of  wishing  to  make  a  purchase  in  the  stock 
market  may  be  well  and  desirably  invested  in  securities,  which, 
in  turn,  are  in  the  safe  deposit  box.  The  man  of  means,  buy- 
ing stocks  at  this  time,  very  likely  expects  to  buy  for  an 
anticipated  quick  rise  in  the  stock  market,  and  would  make  a 
"  marginal  "  purchase  temporarily  rather  than  dispose  of 
well-thought-of  investments  already  owned.  Such  men,  in 
case  of  necessity,  can  sell  these  securities  and  take  up  and  pay 
for  the  stock  "  margined,"  or  use  them  for  increased  "  mar- 
gins," and  it  is  only  this  class  of  people  who  can  safely  carry 
stocks  in  this  way. 

It  is  this  sort  of  business  which  has  been  the  cause  of  many 
stock  exchange  failures.  When  a  brokerage  house  is  carrying 
a  large  amount  of  securities  for  its  customers  on  "  margins," 
some  sudden  panic  seizes  the  market  and  the  stocks  fall 
in  value  so  quickly  that  it  is  impossible  for  the  broker 
to  sell  before  the  "  margins "  are  wiped  out.1  For  in- 
stance, supposing  a  large  amount  of  stock  is  "  margined  " 
at  10%.  Panic  seizes  the  stock  exchange  and  there  is 

1  A  broker  selling  out  his  customer  must  proceed  with  caution,  first  de- 
manding more  margin,  and,  if  that  is  not  forthcoming,  being  careful  to 
give  due  oral  or  written  notice  before  selling  the  securities.  The  law  calls 
for  a  strict  accounting  in  such  proceedings. 

A  recent  New  York  decision  of  the  Court  of  Appeals  has  decided  that  a 
stock  broker  must  give  a  customer  formal  notice  of  the  time  and  place  of 
the  sale  of  stock  held  on  "  margin  "  for  such  client,  or  he  cannot  recover 
any  loss  which  he  may  sustain  in  the  transaction. 


252  MONEY    AND    INVESTMENTS 

practically  no  chance  to  dispose  of  the  stock  before  it 
has  fallen,  say,  20%.  This  rapid  decline  not  only  uses  up 
the  10%  ,  deposited  by  the  customers,  but  the  broker 
has  lost  10%  unless  he  in  turn  can  collect  it  from  his  clients. 
The  inability  to  so  collect,  or  to  get  his  clients  to  put  up 
further  "  margins,"  may  result  in  disaster  to  the  broker.  In 
such  cases  as  this  the  customer  loses  all  the  money  he  has 
deposited  as  a  "  margin."  It  must  be  remembered  that  the 
broker,  in  turn,  is  probably  borrowing  large  sums  to  obtain 
sufficient  funds  to  handle  such  quantities  of  stocks  as  a 
"  marginal  business  "  requires.  The  lenders  call  upon  the 
broker  for  more  "  margin;  "  the  broker  upon  his  clients;  the 
clients  cannot  produce  it;  the  broker  in  turn  is  unable  and 
failure  results.  (See  also  "  Bucket  Shops.") 

Whereas  $10  is  the  amount  of  "  margin  "  per  share  referred 
to  above,  and  is  probably  the  average  amount  required,  the 
figure  is  a  very  movable  one.  Some  brokers  require  a  larger 
figure  than  others;  stock  selling  around  $200  would  probably 
call  for  $20  per  share;  the  usual  intent  being  to  maintain  not 
less  than  10%  of  the  market  value.  Some  stocks  the  better 
class  of  brokers  would  refuse  to  "  margin  "  at  all,  and  stock 
selling  at  a  low  figure,  say  around  $20  per  share,  would  be 
"  half  paid  for  "  if  "  margined  "  at  $10.  That  figure  is 
obviously  too  high  at  such  a  time.  Not  only  is  the  amount  of 
"  margin "  demanded  dependent  upon  the  grade  of  the 
security,  but  its  marketability.  The  privilege  of  calling  for  a 
greater  "  margin  "  is  always  reserved  to  the  broker. 

The  charge  made  by  brokers  for  carrying  marginal  accounts 
varies  greatly,  depending  upon  what  interest  they,  in  turn, 
have  to  pay  on  their  own  loans.  Perhaps  4£%  to  5%  is  the 
average  rate,  but  it  depends  very  much  upon  the  security. 
Naturally,  taking  an  extreme  case,  5%  would  ordinarily  be 
too  great  a  rate  to  charge  for  carrying  government  bonds. 
The  rate  depends  upon  whether  the  account  is  active  or 
inactive.  Where  a  man  is  trading  from  day  to  day  and  the 
broker  is  getting  the  benefit  of  the  commissions,  the  inclina- 
tion would  be  to  charge  a  lesser  rate  of  interest  than  on  an 
inactive  account,  where  a  purchase  or  sale  may  not  occur  for 
a  month  at  a  time.  In  some  instances  accounts  of  people  in 
not  very  good  standing,  or  who  deal  in  very  speculative 
securities,  6%  may  be  the  minimum.  In  any  event  the 
"  carrying  "  charges,  in  the  long  run,  are  quite  profitable  to 
the  broker,  as  he  intends  to  charge  about  1%  more  to  his 
customer  than  he,  in  turn,  has  to  pay  for  the  accommodation. 
In  the  event  of  higher  money  rates,  he  naturally  advances  the 
rate  to  the  customer.  Most  stock  exchanges  do  not  allow  the 
charging  of  a  lesser  rate  than  the  average  which  the  broker 
himself  is  obliged  to  pay  on  all  his  loans.  As  an  offset  to  the 


MONEY    AND    INVESTMENTS  253 

carrying  charges  the  customer  is  always  credited  with  divi- 
dends declared  or  interest  paid  upon  the  securities  purchased. 

The  rules  of  the  London  Stock  Exchange  do  not  permit  of 
dealings  on  "  margin." 

Mark.  (Reichs-mark.)  The  German  monetary  unit  of 
value,  equal  to  $.238  United  States  money;  also  a  Finnish 
coin  equivalent  to  $.193  our  money. 

On  the  New  York  stock  exchange  $1.00  is  reckoned  as  the 
equivalent  of  4  German  marks,  although  there  is  an  actual 
difference  of  $.048,  which  must  be  considered  in  quoting 
securities  affected  thereby. 

Marked  Check.  It  is  not  uncommon  for  a  depositor  to  have 
an  agreement  with  his  bank  that  every  check  drawn  by  him 
shall  bear  a  certain  private  mark,  supposedly  known  only  to 
himself  and  the  bank,  as  a  safeguard  against  forgery;  no 
checks  to  be  honoured  by  the  bank  unless  bearing  this 
mark. 

This  is  not  entirely  advisable,  however,  as  an  intending 
forger  once  learning  of  such  a  mark  can  with  greater  ease  than 
otherwise  effect  a  forgery. 

Market.  In  general  the  meaning  is  the  predominating  feel- 
ing as  to  values.  We  say  the  market  is  high  or  low,  by  which 
we  mean  the  price,  or  rate  of,  purchase.  When,  however,  we 
use  the  expression,  "  sell  in  the  market,"  we  mean  more  the 
place  of  sale,  without  reference  to  the  rate  or  price;  but,  to 
"  sell  at  the  market,"  means  to  sell  at  the  best  price  obtain- 
able, and,  in  that  instance,  would  have  reference  to  the  rate, 
or  price,  rather  than  the  place. 

In  speaking  of  the  "  money  market,"  the  prevailing  rates 
at  which  money  can  be  borrowed  is  understood.  If  the 
"  market  is  bad,"  it  means  that  prices  are  low  and  purchasers 
not  easy  to  find.  The  word  "  market  "  is  in  such  constant  use 
in  talking  financially,  that  almost  an  endless  list  of  expressions 
could  be  cited,  making  use  of  the  word,  but  its  general  applica- 
tion and  meaning  is  as  set  forth  above,  from  an  understanding 
of  which  it  should  be  easy  to  interpret  its  meaning  however 
used. 

Market  Off.  "  The  market  on  TJ.  P.  is  off  five  points  the 
last  hour:  "  indicating  that  the  price  declined  to  that  extent 
within  the  hour. 

Market  Orders.  Orders  to  buy  or  sell  at  the  best  obtainable 
prices  after  receipt  of  the  orders. 

Market  Prices.  Prices  which  are  actually  being  realized; 
prices  which  are  current  at  the  time  and  obtainable,  or 
approximately  so. 

Market  Value.    The  "  market  value  "  of  a  security  at  any 


254  MONEY    AND    INVESTMENTS 

given  time  is  the  price  which  it  will  (probably)  bring  if  sold, 
or  the  price  at  which  a  security  can  (probably)  be  bought. 

Marking  Down  Rates.  Lenders  of  "  call  money  "  notify  the 
borrowers  of  a  decrease  in  interest  rate. 

Marking  Time.  A  waiting,  hesitating  condition  of  the 
market. 

Marking  Up  Rates.  A  notice  to  the  borrowers  of  "  call 
money  "  of  an  increase  in  the  interest  rates  charged  thereon. 

Marks.  In  quotations  of  foreign  exchange  (see  "  Ex- 
change ")  "  marks  "  is  the  common  term  used  to  designate 
exchange  on  Berlin,  the  same  as  we  say  "  francs,"  referring 
to  exchange  on  Paris. 

Mark  Signature.  The  general  custom  is,  when  it  is  necessary 
for  a  person  unable  to  write  to  sign  his  name  to  any  legal  in- 
strument, that  he  must  make  a  cross  —  mark  —  and  then 
some  other  person,  who  saw  him  do  so,  must  write  his  name 
for  him  near  it,  in  his  presence  and  in  this  manner: 

his 

PAUL  X  JONES 
mark 

and  then  sign  his  own  name  as  a  witness. 

In  California  it  is  necessary  to  have  an  additional  witness, 
and  they  must  make  and  sign  a  statement  in  form  substan- 
tially as  follows: 

Paul  Jones  being  unable  to  write,  he  made  "| 
his  mark  in  our  presence,  and  Richard  Black  I      p        v  T 
wrote  Paul  Jones'  name  at  his  request  and  in  f     rAUL  * JO1  ES> 
his  presence.  J 

RICHARD  BLACK. 

PETER  SMITH. 

MAT.    The  "  ticker  "  abbreviation  for  "  matured." 
Matched  Orders.     These  are  used  to  "  manipulate  "  the 
market  as  by  giving  orders  to  buy  and  to  sell  the  same  stock 
at  the  same  price  an  artificial  activity  is  given,  and  likewise 
changes  in  prices  effected. 

Maundy  Money  (or  Maundy  Coins).  Special  pieces  of  me- 
tallic money  of  small  denominations  struck  off  yearly  in  Great 
Britain  and  distributed  by  the  Almoner  of  the  English 
Sovereign  to  certain  people  who,  on  Maundy  Thursday  (the 
day  before  Good  Friday),  attend  service  in  the  Chapel  Royal, 
at  Whitehall.1 

Mayflower.     Mayflower  Mining  Co.      (Copper  and  gold.) 
Mechanic's  Lien.     A  lien  on  real  property  (see  "  Lien  ") 
1  Century  Dictionary  and  Cyclopedia. 


MONEY    AND    INVESTMENTS  255 

which  the  law  allows  to  mechanics  and  labourers  for  work 
done,  or  to  those  supplying  materials,  in  the  construction  of 
buildings  or  improvements  to  real  property.  A  lien  of  this 
kind  should  always  be  recorded  in  the  Register  of  Deeds' 
office  the  same  as  a  mortgage.  In  buying  property,  or  taking 
a  mortgage  on  the  same,  the  non-existence  of  "  mechanics' 
liens  "  is  one  of  the  things  to  be  ascertained.  In  some  States, 
such  liens  as  the  above  would  precede  any  claim  of  the  con- 
tractor; mothers,  just  the  re  verse.  A  mortgage  put^on  a  prop- 
erty under  improvement  —  "  building  mortgage,"  so  called 
-  would,  in  many  States,  have  prior  claim  to  any  "  me- 
chanics' liens  "  afterwards  recorded. 

In  most  States,  these  liens  can  be  enforced  against  the 
property  by  the  unpaid  employees  of  a  builder  or  contractor 
even  though  the  owner  has  paid  the  builder  or  contractor  in 
full.  Consequently,  all  building  contracts  should  provide 
that  the  last  payment  be  retained  until  the  time  for  filing 
"  mechanics'  liens  "  (usually  thirty  days)  has  expired,  as, 
otherwise,  the  owner  may  be  compelled  to  pay  the  em- 
ployees after  paying  the  employer. 

Meet.  To  fulfil  one's  promise  or  agreement  when  it  matures. 
White's  note  for  $1,000  falls  due  Jan.  1st;  he  "  meets  "  it  by 
paying  it. 

Melon.  "  Cutting  a  melon;  "  a  division  of  extraordinary 
profits;  the  declaring  of  a  stock  dividend;  any  unusual  profits 
received  by  the  stockholders  of  a  corporation.  The  "  cutting 
of  a  melon  "  and  getting  a  view  of  its  delectable  contents  is  a 
moment  of  great  happiness  to  the  little  Southern  negro;  this 
suggests  the  use  of  the  term  to  express  a  like  amount  of  finan- 
cial happiness  caused  by  profits  or  dividends  out  of  the 
ordinary. 

Mercantile  Agencies.  Firms  or  corporations  whose  business 
it  is  to  furnish  information  as  to  the  financial  standing, 
general  business  integrity,  and  credit  ratings  of  individuals, 
firms,  and  corporations.  (See  "  Commercial  Agencies.") 

Mercantile  Bills.  The  same  thing  as  "  inland  "  or  "  do- 
mestic exchange,"  which  will  be  found  explained  under 
"  Exchange." 

Mercantile  Marine.  The  International  Mercantile  Marine 
Co.  (Steamships.) 

Mercantile  Paper  (or  Loans).  Notes,  bills  of  exchange, 
drafts,  or  any  negotiable  paper,  given  by  those  engaged  in  the 
actual  purchase  or  sale  of  goods,  such  as  a  dry  goods  mer- 
chant, for  instance.  A  note  given  by  a  street  railway  com- 
pany would  not  be  considered  "  mercantile  paper."  All  the 
above,  however  comes  under  the  general  term  of  "  commer- 
cial paper." 


256  MONEY    AND    INVESTMENTS 

Merchandising  Customers'  Accounts.  This  is  a  plan  adopted 
by  some  of  the  large  department  stores  which,  in  general, 
permits  a  customer  to  deposit  any  sum  of  money  with  the 
store,  which  money  draws  interest  at,  say,  4%  per  annum  for 
every  day  it  is  on  deposit.  In  some  cases,  interest  is  com- 
pounded every  three  months.  The  customer  may  withdraw, 
by  check,  all  or  any  part  of  this  money  at  any  time,  but  the 
main  object  is  that  it  permits  the  customer  to  purchase  goods 
to  a  value  not  exceeding  the  amount  which  he  has  on  deposit, 
such  purchases  being  charged  against  money  to  his  credit. 
Stores  doing  this  sort  of  business  claim  to  be  able  to  sell  goods 
at  a  lower  price  than  would  be  the  case  if  credit  were  given. 
From  the  customer's  standpoint  it  permits  him  to  buy  goods 
without  paying  cash  each  time,  and  it  is  especially  helpful  if 
he  makes  purchases  from  a  distance. 

Mergenthaler.  Mergenthaler  Linotype  Co.  (Type-setting 
machines.) 

Merger.1  A  consolidation;  an  amalgamation;  a  combina- 
tion of  two  or  more  corporations  under  one  management. 
The  old  meaning  in  law  was  a  merging  or  drowning  of  a  less 
estate  into  a  greater.  One  of  the  most  notable  examples 
of  its  financial  meaning  is  the  International  Mercantile  Marine 
Company,  which  now  controls  so  many  of  the  large  trans- 
Atlantic  lines. 

Metallic  Standard.  (It  is  necessary  to  first  comprehend  the 
matter  under  "  Standard  of  Value.")  The  use  of  either  one 
metal  alone  or  of  two  metals  together,  as  a  standard,  in  a 
monetary  system. 

Metropolitan.  Metropolitan  Street  Railway  Co.,  of  New 
York  City. 

Mex.    Mexico;    Mexican  money. 

Mex.  Cent.    Mexican  Central  Railway  Co.,  Limited. 

Mexican  Central.  Mexican  Central  Railway  Co.,  Lim- 
ited. 

Mexican  Coinage  Laws.  In  accordance  with  authority 
granted  him  by  the  Mexican  Congress,  President  Diaz  pro- 
mulgated the  new  monetary  law  prepared  by  the  Ministry  of 
Finance,  which  became  operative  May  1,  1905.  The  following 
translation  of  this  new  law  has  been  furnished  the  author  by 
the  officials  of  the  United  States  Mint. 

1  "  The  practical  difference  between  this  form  of  merger  and  a  holding 
company  appears  principally  in  those  cases  where  the  holding  company 
owns  not  all  but  only  a  part  of  the  capital  stock  of  its  constituent  corpora- 
tions. Where,  as  in  the  case  of  the  United  States  Steel  Corporation  or  the 
American  Agricultural  Chemical  Company,  the  entire  ownership  of  the 
stock  of  the  constituent  companies  occurs,  the  holding  company  becomes 
truly  a  legal  fiction."  —  "  Trusts,  Pools  and  Corporations,"  by  Ripley. 


MONEY    AND    INVESTMENTS  257 

"  Article  1.  The  theoretic  unit  of  the  monetary  system  of 
the  United  Mexican  States  is  represented  by  75  centigrams 
of  pure  gold,  and  is  called  '  peso.' 

"  The  silver  '  peso  '  heretofore  coined,  containing  twenty- 
four  grams  and  four  thousand  three  hundred  and  eighty-eight 
tenths  milligrams  of  pure  silver  (24.4388)  will  have,  under  the 
conditions  laid  down  by  this  law,  a  legal  value  equivalent  to  the 
aforesaid  75  centigrams  of  pure  gold." 

Article  2  gives  the  denominations  and  is  translated  as 
follows: 

"  Article  2.  The  '  peso  '  is  divided  into  100  centavos,  and 
the  coins  that  are  to  be  struck  shall  represent  the  following 
values: 

"  Gold  coins  — 10  pesos,  5  pesos. 

"  Silver  coins  —  1  peso,  50  centavos,  20  centavos,  10  centavos- 

"  Nickel  coins  —  5  centavos. 

"  Bronze  coins  —  2  centavos,  1  centavo." 

The  Daily  Consular  Report  of  Aug.  7,  1905,  contained  the 
following: 

"  Consul  Canada,  of  Veracruz,  reports  that  .  .  .  the  new 
Mexican  peso  will  henceforth  be  the  fixed  standard  of  cur- 
rency, and  the  value  of  all  foreign  coins  must  be  expressed  in 
equivalents  of  the  same.  In  quoting  the  values  of  foreign 
coins  the  following  arbitrary  signs  have  been  adopted  for 
expressing  the  units  of  such  legal  currency:  $,  signifies  stand- 
ard Mexican  peso;  Dls.,  American  dollar;  £,  British  pound 
sterling;  Frs.,  French  francs;  Ms.,  German  marks;  P., 
Spanish  peseta;  Ks.,  Austrian  crowns. 

"  The  foregoing  signs  are  obligatory  in  all  business  trans- 
actions. The  phrase  '  peso  oro,'  which  formerly  signified  an 
American  dollar,  must  not  be  used  to  designate  that  coin,  but 
instead  of  it  the  word  '  dollar.'  Exchange  formerly  quoted  at 
—  per  cent,  of  the  value  of  the  Mexican  silver  peso  must  now 
be  expressed  in  decimal  parts  of  the  value  of  the  new  Mexican 
standard  peso.  Whenever  the  standard  value  of  a  foreign  coin 
is  less  than  that  of  the  Mexican  3  points  decimal  will  be  used 
in  expressing  the  value  in  Mexican  currency,  and  on  the  con- 
trary 4  points  decimal  may  be  used." 

Mexican  Dollars.  (The  Mexican  dollar  is  also  called  a 
"  peso.")  An  owner  of  the  United  States  silver  dollar,  although 
there  is  not  a  gold  dollar's  worth  of  silver  in  it,  knows  that  it 
can  be  exchanged  for  a  gold  dollar  at  the  Treasury  at  any 
time.  In  other  words,  this  country  is  upon  a  "  gold  stand- 
ard." Mexico  has  recently  adopted  a  sort  of  tentative  "  gold 
standard  "  (see  that  subject)  whereby  it  will  redeem  its  silver 
dollars  in  gold  at  the  ratio  of  two  of  the  former  to  one  of  the 
latter.  Recently  the  price  of  silver  has  so  advanced  that  the 


258  MONEY    AND    INVESTMENTS 

value  of  pure  silver  in  a  dollar  slightly  exceeds  one-half  the 
value  of  the  gold  dollar,  therefore,  putting  at  least  a  tem- 
porary stop  to  such  redemptions.  The  United  States  Mint  at 
Philadelphia  is  at  this  time  coining  gold  for  Mexico. 

Mexican  dollars  are  used  in  many  of  the  Eastern  countries 
as  a  common  form  of  money,  and,  in  consquence,  are  used  by 
bankers  and  shipped  to  the  Orient  in  settlements  of  debts 
due  in  place  of  gold.  The  quotations  of  Mexican  dollars  ap- 
pear in  the  newspapers  and  are  apt  to  vary  slightly  from  day 
to  day.  The  Mexican  silver  dollar  weighs  about  one  ounce, 
but  an  ounce  of  silver  in  bullion  form  is  quoted,  for  ex- 
ample, "  Bar  silver,  66£."  Mexican  dollars  at  the  same  time 
being  quoted  at  51^,  there  being  a  difference  of  15^  between 
the  two  quotations.  As  the  latter  are  not  pure  silver,  allow- 
ance has  to  be  made  for  the  alloy. 

Mexico  is  the  largest  producer  of  silver  in  the  world,  and 
views  with  much  satisfaction  an  increase  in  the  price  of 
silver,  as  that  country  coins  silver  dollars  especially  for  ex- 
port. (See  also  last  subject.) 

Michigan.    Michigan  Copper  Mining  Co. 

Middleman.  One  who  negotiates  between  two  parties, 
receiving  a  compensation  for  his  service.  Not  one  who  buys 
and  sells  on  his  own  account,  but,  in  a  general  sense,  one  who 
finds  a  customer  to  purchase  wares  belonging  to  another. 
"  Middlemen  "  may  be  divided  into  three  classes:  "  Agents," 
"  brokers,"  and  "  factors."  Among  the  first  named  may  be 
included  real  estate  agents,  insurance  agents,  book  agents, 
etc.  Among  the  second,  stock,  cotton,  wool,  ship  brokers, 
etc.  The  "  factor  "  is  not  much  used  in  this  country,  although 
"  cotton  brokers  "  are  sometimes  called  "  factors."  One  who 
collects  rents  for  another  may  be  a  "  factor,"  or  one  who 
makes  a  business  of  selling  goods  on  a  commission  for  the 
manufacturer,  selling  the  same,  usually,  upon  samples,  and 
so  on. 

Middle  Price.  This  is  used  in  Great  Britain,  and  will  be 
understood  by  reading  "  jobber,"  as  it  is  the  price  half  way 
between  the  buying  and  selling  prices  which  he  makes  on  a 
security.  (See  "  London  Stock  Exchange  Transactions.") 

Midland  (or  Midland  Route).  In  America  "  Midland " 
usually  refers  to  the  Colorado  Midland  Railway,  but  abroad 
the  Midland  Railway  of  Great  Britain  is  understood. 

Milking.  To  squeeze  all  possible  profits  out  of  a  transaction; 
also,  by  "  manipulation,"  to  profit  at  the  expense  of 
others. 

Milling.    The  operation  of  putting  the  series  of  small  cross 

1  Century  Dictionary  and  Cyclopedia. 


MONEY    AND    INVESTMENTS  259 

ridges  and  furrows  on  the  edge  of  a  coin,1  and  done  to  prevent 
cutting  away  any  of  the  edge. 

Mill  Paper.    See  "  Corporation  Paper." 

Milreis.  (Commonly  called  "  reis.")  The  monetary  unit 
of  Brazil  equal  to  $.546  and  of  Portugal  equal  to  $1.08 
United  States  money. 

Mining  Contango  Day.    See  "  Fortnightly  Settling-Days. " 

Mining  Securities.  See  Chapter  II  at  the  beginning  of  the 
book. 

Minor  Coins.  Coins  used  to  make  small  change,  struck  from 
metals  other  than  gold  or  silver,  and  in  small  denominations. 
Our  five  cent  nickel  and  one  cent  pieces  are  examples. 

Mint.1  One  writer  defines  a  "  mint  "  as  "  giving  official 
stamp  and  guarantee  "  to  a  government's  coin,  or  a  coin 
factory.  The  "  mint  "  receives  gold  and  silver  bullion  for 
coinage  and  performs  other  services  for  the  people  in  con- 
nection therewith,  as  is  more  fully  explained  under  "  Assay 
Office."  Coinage  mints  are  now  located  in  Philadelphia, 
San  Francisco,  New  Orleans,  and  Denver. 

The  first  Mint  in  the  world  was  established  in  the  City  of 
Mexico  in  1537. 

Mint  Mark.  Our  coins,  except  those  struck  at  Philadelphia, 
bear  a  mark  to  show  at  what  mint  they  were  coined,  as  "  S  " 
for  San  Francisco. 

Mint  Office  Checks.  Checks  drawn  on  the  Assistant  Treas- 
urer at  New  York  by  the  Superintendents  of  the  United  States 
Mint  at  San  Francisco  and  the  Assay  Office  at  New  York,  and 
the  assayers  in  charge  of  the  Assay  Offices  of  the  United 
States  at  Seattle,  Helena,  and  Boise,  respectively,  in  pay- 
ment for  gold  bullion  deposited. 

Large  depositors  at  the  offices  named  generally  prefer  to 
receive  payment  by  check  instead  of  in  coin. 

Mint  Par.  The  "  mint  par  "  of  an  English  "  pound  ster- 
ling," for  illustration,  as  expressed  in  our  system  of  coinage, 
is  its  intrinsic  worth,  or  actual  equivalent,  in  the  gold  coins 
of  this  country;  i.  e.  $4.866^. 

Mint  Price.    See  "  Bar  Gold." 

Mint  Remedy.  See  "  Remedy  Allowance  "  and  "  Toler- 
ance." 

Mississippi  Scheme   (or  Company).     See  "  Law,  John." 

Mixed  Collateral.  When  a  loan  is  secured  by  more  than  one 
kind  of  collateral  (see  "Collateral  Loan"),  as,  for  example, 

1  On  April  2,  1792,  President  George  Washington  attached  his  signature 
to  an  Act  establishing  the  National  Mint,  which  Act  was  mainly  the  result 
of  the  efforts  of  Robert' Morris,  aided  by  Thomas  Jefferson  and  Alexander 
Hamilton. 


260  MONEY    AND    INVESTMENTS 

part  railway  stocks  and  part  mining  stocks,  the  collateral 
is  called  "  mixed."  A  loan  secured  in  this  way  is  known  as  a 
"  mixed  (collateral)  loan." 

M.  J.  S.  D.  March,  June,  September,  and  December; 
interest  or  dividends  payable  quarterly,  beginning  with  March. 

Mk.    Frequently  used  as  the  sign  of  the  German  "  mark." 

ML.    The  "  ticker  "  abbreviation  for  "  main  line." 

Mohawk.    Mohawk  Mining  Co.     (Copper.) 

Monetary  Standard.    See  "  Standard  of  Value." 

Monetary  Unit.    See  "  Unit  of  Value." 

Money1.  In  a  broad  sense,  any  article  of  value  recognized 
as  a  medium  of  exchange,  but,  for  convenience'  sake,  stamped 
metal  or  paper  notes  issued  by  or  under  the  authority  of  a 
Government.  Money  is  merely  a  measure  and  standard  of 
value. 

Chevalier  said  in  1854  that  metallic  money  is  the  only  true 
money. 

He  defines  money  as  "  a  certain  commodity  out  of  which 
we  create  an  instrument  that  serves,  in  exchanges,  as  a 
common  measure  of  value,  because  it  is  with  it  that,  in  trans- 
actions, all  other  commodities  are  compared.  But  it  is  not 
merely  a  measure;  it  figures  in  exchanges  in  another  capa- 
city, that  of  a  material  recompense  or  equivalent.  .  .  . 
The  definition  of  the  word  '  money  '  which  I  have  given, 
namely,  that  it  is  at  once  a  measure  and  an  equivalent,  is  that 
which  is  acknowledged  by  all  ...  authorities." 

Gen.  Walker  declared  that  any  commodity  could  become 
money  as  soon  as  it  acquired  a  requisite  degree  of  accepta- 
bility. 

When  we  say  that  "  money  is  easy  "  we  mean  that  interest 

1  In  different  ages  many  commodities  have  served  the  purpose  of  money, 
—  "  tin  was  used  in  ancient  Syracuse  and  Britain  ;  iron,  in  Sparta  ;  cattle, 
in  Rome  and  Germany  ;  platinum,  in  Russia ;  lead,  in  Burmah  ;  nails,  in 
Scotland  ;  silk,  in  China  ;  cubes  of  pressed  tea,  in  Tartary  ;  salt,  in  Abys- 
sinia ;  slaves,  amongst  the  Anglo-Saxons  ;  tobacco,  in  the  early  settlements 
of  Virginia ;  codfish,  in  Newfoundland ;  bullets  and  wampum,  in  Massa- 
chusetts ;  logwood,  in  Campeachy ;  sugar,  in  the  West  Indies  .•  soap,  in 
Mexico.  Money  of  leather  and  wood  was  in  circulation  in  the  early  days  of 
Rome."  —  "  History  of  the  U.  S.  Mint  and  Coinage,"  George  G.  Evans. 
^  In  1612  money  of  brass  was  coined  in  America.  Coined  money  came 
into  use  in  Rome  during  the  reign  of  Servius  Tullius,  578-534  B.  c. 

"In  Tennessee,  between  1790  and  1798,  land  was  used  as  a  kind  of 
currency ;  prices  were  set  in  it,  and  it  was  transferred  in  payment  of  goods 
and  services."  —  Sumner's  "  Life  of  Andrew  Jackson." 

Prescott,  in  his  "Conquest  of  Mexico,"  states  that  the  money  in  use 
among  the  ancient  Aztecs  consisted  of  transparent  quills  filled  with  gold 
dust ;  bits  of  tin,  cut  in  the  form  of  a  T  ;  and  of  bags  of  cocoa,  containing  a 
specified  number  of  grains. 

Some  shell  money  is  still  in  use  among  a  few  of  the  primitive  African 
tribes. 


MONEY    AND    INVESTMENTS  261 

rates  are  low,  and  that    the   borrower   is   easily   accommo- 
dated. 

Money  Circulation.  At  this  time  of  writing,  Feb.  1,  1907, 
our  "  money  circulation  "  is  equal  to  $33.96  per  capita,  with  an 
estimated  mainland  population  of  85,484,000.  The  Treasury 
Department  estimates  that  to  maintain  the  present  per 
capita  circulation  the  increase  in  population  of  the  country 
makes  it  necessary  to  add  about  $50,000,000  to  the  monetary 
stock  each  year. 

Money  Market.  By  this  is  understood  not  only  the  interest 
and  "  discount  "  rates  quoted  by  those  having  money  to 
lend,  such  as  the  banks,  trust  companies,  etc.,  but  those  actu- 
ally engaged  in  the  business  of  lending  it. 

Money  of  Account.     A  denomination  of  money  used  to 
reckon  in,  but  not  actually  coined.    The  gold  dollar  of  New- 
foundland may  be  considered  as  such,  as  it  is  not  coined; 
the  $2  gold  piece  and  silver  and  copper  coin  of  lesser  denomi- 
nations than  the  dollar  are  the  current  pieces. 
Money-Orders.     See  "  Postal  Money-Orders." 
Money  Pools.    See  footnote  to  the  subject  "  Pool." 
Money  Rates.    This  is  a  heading  or  term  often  met  with  in 
financial  articles,  and  indicates  the  interest  or  "  discount  " 
rates  quoted  by  those  having  money  to  lend.     The  price 
charged  for  money  loaned. 

Money  to  Move  the  Crops.    See  "  Movement  of  the  Crops." 
Money,  World's  Stock  of.    See  "  World's  Stock  of  Money." 
Monometallism.     Coinage  which  calls  for  the  use  of  one 
metal  only  as  a  standard  of  value;  a  system  of  coinage  by 
which  only  gold,  or  some  other  kind  of  metallic  coins,  are 
recognized  as  "  legal  tender."     For  example,  about  the  year 
1851  when  the  gold  mines  of  California  and  Australia  pro- 
duced gold  in  large  quantities,  Belgium  demonetized  gold  and 
became  silver  "  monometallic."     (See  "  Bimetallism.") 

Monon.  Chicago,  Indianapolis  &  Louisville  Ry.  Co.  (Con- 
trolled jointly  by  the  Louisville  &  Nashville  and  Southern 
Ry.  Companies.) 

Monopoly.  There  are  many  different  views  as  to  the  true 
meaning  of  this  word.  One  prominent  writer  defines  it  as 
"  a  grant  by  the  government  for  the  sole  buying,  working, 
making  or  using  of  anything."  Another  —  and  probably 
much  nearer  the  truth  —  "  where  within  a  certain  territory 
all  sales  of  a  certain  article,  or  the  doing  of  a  certain  act,  is  in 
the  control  of  a  single  person,  or  combination." 

Prof.  Ripley  says:  "  If  the  tendency  towards  com- 
bination means  anything,  it  means  the  substitution  of  cen- 
tralized and  consolidated  management  for  the  rivalry  of 


262  MONEY    AND    INVESTMENTS 

independent  concerns;    and  this  may  fairly  be  termed  mon- 
opoly." 

The  Standard  Oil  Co.  is  a  good  illustration. 

Some  "  franchises "  are  more  monopolistic  in  character 
than  others.  A  street  railway  or  dock  franchise  more  so  than 
the  franchise  of  a  water,  gas,  or  electric  lighting  company. 

Montreal  &  Boston.  Montreal  and  Boston  Consolidated 
Mining  &  Smelting  Co.  (Copper.) 

Mop.    Missouri  Pacific  Railway  Company. 

Mo.  Pac.  (or  Mopac.).    Missouri  Pacific  Railway  Co. 

Moratorium.  The  law  regards  this  as  a  legalized  delay  of 
a  payment  due.  During  the  Russo-Turkish  War,  Russia 
established  a  "  moratorium "  by  which  the  payment  of 
private  debts  was  suspended  for  a  fixed  period.  A  legislative 
act  may  legalize  suspension  of  payment  on  the  part  of  a 
Government  bank. 

Morgan  Interests.  Certain  corporations  partially  or  en- 
tirely in  the  control  of  the  firm  of  J.  P.  Morgan  &  Co.,  con- 
sisting in  part  of  the  Reading,  the  Central  Railway  of  New 
Jersey,  Atlantic  Coast  Line,  the  Louisville  &  Nashville, 
Northern  Pacific,  Great  Northern,  Chicago,  Burlington  & 
Quincy,  and  the  Southern  Railway  Companies.  Also  the 
United  States  Steel  Corporation  and  General  Electric  Com- 
pany. 

Mortgage.1  An  instrument  signed,  sealed,  and  given  by 
the  borrower  (or  "  mortgagor  ")  to  the  lender  (or  "  mort- 
gagee "),  or  to  a  third  party  who  holds  it  as  trustee  for 
the  lender,  by  which  the  latter  has  the  right  to  possess 
himself,  by  following  proper  formalities,  of  property  de- 
scribed in  the  instrument,  in  case  the  borrower  does  not  meet 
his  indebtedness  as  set  forth  in  the  conditions  agreed  to  at  the 
time  of  creating  the  debt.  In  general,  a  "  mortgage  "  is, 
to  all  intents  and  purposes,  a  legal  transfer  of  title  to  property 
to  take  effect  only  in  case  the  money  is  not  paid  to  secure 
which  the  transaction  was  given.  It  is  a  method  of  securing 
to  the  lender  certain  property,  in  case  of  failure  to  pay  on  the 
part  of  the  borrower.  A  wife  must  also  sign  and  acknowledge 
the  instrument. 

A  "  mortgage  "  may  be  given  to  secure  the  performance  of 
other  conditions  than  the  payment  of  a  debt,  and  sometimes  is. 

The  word  "  mortgage  "  is  used  to  mean  either  the  act  of 

1  "  Many  of  these  documents,  preserved  in  the  British  Museum,  are 
records  of  deeds  and  the  partition  of  real  estate,  but  a  few  involve  loans 
of  silver  at  interest,  and  these  become  more  numerous  in  the  reigns  of 
Nebuchadnezzar  and  Nabopolassar  (625-604  B.C.).  Loans  secured  by 
mortgage  on  land  and  guarantee  bonds  are  among  the  curious  commercial 
documents  of  these  early  times."  —  "  The  Principles  of  Money  and  Bank- 
ing," Charles  A.  Conant. 


MONEY    AND    INVESTMENTS  263 

"  mortgaging  "  or  the  instrument  by  which  it  is  effected, 
called  the  "  mortgage-deed."  (See  "  Extension  of  Mortgage.") 

Proper  caution  should  always  be  taken  to  ascertain  that 
the  title,  or  legal  ownership,  to  the  property  to  be  mortgaged 
is  in  the  party  giving  the  property  as  security  for  the  debt,  and 
for  this  purpose  a  lawyer  is  usually  engaged.  There  are, 
however,  "  land  title  companies,"  also  called  "  title  guarantee 
companies,"  and  "  title  insurance  companies,"  which  make 
a  business  of  looking  up  titles  and  usually  guaranteeing  their 
validity.  A  paper  is  sometimes  given  showing  the  records  of 
the  successive  ownerships  of  the  property  and  of  any  incum- 
brances  thereon,  which  is  called  an  "  abstract  of  title,"  or  a 
"  search." 

If  a  mortgage  is  to  cover  buildings  or  property  subject  to 
destruction  by  fire,  the  lender  should  ascertain  that  there  is 
sufficient  insurance  for  his  protection  and  that  the  insurance 
policy  (or  policies)  are  indorsed  by  the  agent  or  company 

somewhat  as  follows:  "  Payable  in  case  of  loss  to , 

mortgagee,  as  his  interest  may  appear." 

After  the  mortgage  has  been  delivered  to  the  lender  of  the 
money,  that  is  to  say,  the  "  mortgagee,"  he  should  promptly 
send  it  to  be  "  recorded  "  in  what  is  called  the  Registry  of 
Deeds  Office  at  the  county  seat.  This  is  to  prevent  a  dishonest 
"  mortgagor  "  giving  a  subsequent  mortgage  upon  the  prop- 
erty, and  which  might  be  recorded  ahead  of  the  first  one 
given. 

Mortgage  Bond.  A  promise  to  pay  in  the  form  of  a  bond  and 
secured  by  a  mortgage  on  property. 

Mortgage  Collateral  Trust  Bonds.  See  first  paragraph  of 
"  Collateral  Trust  Bonds." 

Mortgage  Debenture.  This  is  explained  under  "  Debenture 
Bond." 

Mortgage-Deed.    See  "  Mortgage." 

Mortgagee.  The  individual,  firm,  or  corporation,  to  whom 
property  is  mortgaged;  the  one  holding  the  mortgage;  in 
other  words,  the  lender  of  money. 

Mortgage  Sale.  The  sale  of  property  mortgaged  as  se- 
curity for  the  payment  of  a  debt  or  the  fulfilment  of  a  contract, 
as  explained  under  "  Foreclosure." 

Mortgagor.  (The  proper  spelling  of  this  should  be  "  mort- 
gageor,"  but  by  custom  the  "  e  "  has  been  dropped.)  The 
person,  firm,  or  corporation  which  signs  or  gives  a  mortgage 
against  property;  the  one  who  grants  the  estate  as  security 
for  debt;  in  other  words,  the  borrower  of  the  money.  The 
man  who  mortgages  his  house  and  land  as  security  for  $10,000 
is  the  "  mortgagor." 


264  MONEY    AND    INVESTMENTS 

Movement  of  Gold.  See  "  International  Movement  of 
Gold." 

Movement  of  the  Crops.  New  York  is  our  great  money 
centre,  and  where  country  banks  may  keep  one-half  their 
lawful  reserves.  In  addition,  when  money  cannot  be  profitably 
employed  elsewhere,  it  still  further  accumulates  there  as  in- 
terior banks  are  allowed  interest  upon  their  New  York  de- 
posits. 

When  the  South  prepares  to  harvest  its  cotton  crop  and 
the  West  its  grains,  a  feeling  of  anxiety  pervades  the  money 
market,  for  then  the  country  banks  will  need  to  recall  their 
New  York  balances  to  afford  the  planter  and  farmer  the  neces- 
sary accommodation  to  carry  him  through  the  harvesting  and 
crop  moving  period,  or  to  furnish  the  middleman  the  means 
to  purchase  the  produce.  During  these  periods  the  available 
supply  of  money  for  Wall  Street  affairs  is  sometimes  so  severely 
curtailed  that  interest  rates  advance  sharply  and  possibly  the 
stock  market  is  affected.  There  is  a  gradual  return  flow  of 
money  during  the  winter  and  spring. 

The  call  of  the  harvest  for  currency  begins  to  make  itself 
first  felt  in  July  in  the  southwestern  reserve  cities,  for  then 
the  winter  wheat  begins  to  ripen.  The  country  banks  in 
Oklahoma  and  adjacent  territory,  as  well  as  the  Kansas 
City  and  St.  Louis  banks,  experience  the  demand,  not  only 
for  small  money  with  which  to  pay  the  harvesters,  but  for 
loans  from  the  middleman.  As  the  stock  of  money  in  that 
section  is  depleted  Chicago,  New  York,  and  the  Eastern  money 
centres  are  then,  in  turn,  called  upon.  "  Then,  as  the  season 
progresses,  and  crops  in  various  sections  of  the  country  are 
harvested,  a  flow  of  currency  from  the  East  to  the  South, 
to  the  West  and  to  the  Northwest  sets  in  and  does  not  cease 
until  the  cotton,  corn,  and  wheat  of  the  country  are  all  mar- 
keted and  the  farmers'  work  for  the  season  is  over."  * 

Foreign  countries,  of  course,  experience  this  same  harvest 
demand  for  money.  In  Austria,  the  Austro-Hungarian  Bank 
is  called  upon  to  largely  increase  its  note  issues  during  the 
month  of  October,  which  in  that  country  is  the  harvest 
month.  Germany  likewise  feels  the  call  during  September. 

The  size  of  the  harvest  and  the  prices  obtainable  are  very 
important  factors.  Their  influences  are  felt  throughout  the 
land  and  abroad.  The  available  supply  of  grains  and  cotton 
for  foreign  shipment  may  be  of  great  importance  to  Europe 
and  Asia.  Good  crops  and  good  prices,  so  that  the  surplus 
may  be  shipped,  mean  large  earnings  to  many  railroads. 
These  earnings  for  the  crop  year  of  1906  are  estimated  at 

1  Report  of  the  Special  Currency  Committee  of  the  Chamber  of  Commerce 
of  the  State  of  New  York. 


MONEY    AND    INVESTMENTS  265 

$524,764,025.1  Crop  statistics  are  studied  with  great  interest 
by  all  speculators  in  "  granger  "  road  securities.  Business 
throughout  the  land  is  to  a  great  extent  influenced  by  the 
yearly  product  of  the  agricultural  sections.  Do  not  forget 
that  the  United  States  is  still,  to  a  large  extent,  a  farming 
country  —  nearly  fifty  per  cent,  of  the  people  being  engaged 
in  agricultural  pursuits  —  and  that  what  affects  the  farmer 
affects  us  all. 

The  crops  are  one  of  the  most  important  of  all  the  business 
barometers,  as  by  them  future  conditions  may  be  to  quite 
an  extent  predicted. 

MTG.    The  "  ticker  "  abbreviation  for  "  mortgage." 

Municipal  Bond.  Any  legally  authorized  bond  issued  by 
village,  township,  city,  county,  State,  or  any  territorial 
subdivision  of  the  same,  the  payment  of  which  must  be  ac- 
complished through  the  collection  of  taxes,  assessed  upon  the 
property  embraced  in  the  division  or  subdivision  issuing  the 
bond. 

Read  the  matter  under  "  Attorney's  Opinion  "  and  apply 
in  the  purchase  of  a  bond  of  this  class.  Other  facts  to  be 
ascertained  are:  The  "  net  indebtedness  "  2  —  considering 
this  from  the  standpoint  of  its  ratio  to  the  "  assessed  valua- 
tion "  -  what  revenue  producing  property  is  owned,  whether 
or  no  there  is  a  sound  "  sinking  fund  "  plan  or  other  method 
established  for  the  ultimate  payment,  rather  than  "  refund- 
ing "  the  indebtedness,  the  past  financial  standing  of  the 
municipality,  and  the  length  of  time  since  there  has  been  — 
if  ever  —  default  in  its  obligations.  If  there  has  been  one, 
the  reason  of  it  should  be  ascertained  and  judgment  taken 
accordingly.  Then  one  should  consider  the  character  of  the 
population,  and  the  class  of  citizens  administering  public 
offices,  and  who  are  likely  to  do  so  in  the  future.  There  is  good 
reason  for  not  buying  bonds  of  a  city  cursed  with  frequent 
strikes,  and  dependent  upon  one  class  of  industry.  A  city 
wholly  dependent  upon  the  lumber  business  is  not  a  good 
risk,  for  example.  Is  the  community  experiencing  a  "  boom?  " 
If  so,  be  sure  that  its  debts  are  not  being  contracted  along  the 
same  lines.  Also  consider  the  surrounding  country  and  its 
resources,  and  the  likelihood  of  the  muncipality  in  question 
growing  or  losing  in  population.  There  are  so  many  things 
to  be  considered  in  selecting  a  bond  of  a  municipality  whose 
credit  is  unknown  to  the  purchaser,  that  but  a  general  idea 
can  be  given  here.  The  circulars  of  bond  houses  set  forth 
with  much  exactness  most  things  necessary  to  know.  They 

1  Figures  furnished  the  writer  by  G.  J.  Grammer,  at  the  time,  Vice-Presi- 
dent  in  charge  of  traffic  of  the  New  York  Central  Lines. 

2  All  subjects  in  quotation  marks  will  be  found  explained  under  their 
separate  headings. 


266 


MONEY    AND    INVESTMENTS 


should  be  studied  with  care,  and  thoughtful  inquiry  made 
of  business  conditions  and  resources  of  the  place  under 
consideration. 

If  the  reader  is  entirely  inexperienced  in  the  purchase  of 
this  class  of  securities,  then  the  perusal  also  of  such  subjects 
as  "  Legal  Investment  for  Savings  Banks,"  "  Bond  Values 
Tables,"  and  "  Net  Return  upon  the  Investment  "  is  advised. 

Upon  the  whole,  municipal  bonds  are  about  as  good  a 
field  for  the  safe  investment  of  funds  as  any.  The  percentage 
of  loss  within  the  last  twenty-five  years  has  been  but  small. 
For  this,  credit  is  due  the  dealers  in  such  securities  who  have 
been  largely  instrumental  in  improving  the  laws  regulating 
their  issuance  in  many  of  the  States,  and  who  have  forced 
the  municipalities  to  live  up  to  them,  and  who  have  offered 
but  little  encouragement  for  too  excessive  debt  creating 
even  where  legally  permissable. 

Mutilated  Currency,  Redemption  of.  Those  desiring  to 
have  currency  redeemed  which  has  been  mutilated  are  ad- 
vised to  write  to  the  United  States  Treasury  Department  for 
instructions,  as  there  are  certain  rules  and  conditions  with 
which  it  is  necessary  to  comply,  and  which  can  be  had  in 
printed  form. 

Mutual  Savings  Bank.  A  savings  institution,  all  the  profits 
of  which  belong  to  the  depositors;  mutual  ownership.  Most 
savings  banks  are  of  this  kind,  and  are  without  capital  stock. 
However,  there  are  in  Pennsylvania,  for  example,  savings 
banks  of  both  kinds,  those  with  and  those  without  capital 
stock. 

Savings  banks  with  capital  stock  are  known  as  "  stock 
savings  banks,"  and  the  stockholders  of  such  institutions 
derive  their  profits  after  the  payment  of  the  interest  to  the 
depositors. 

The  management  of  savings  banks  having  capital  stock  is 
vested  in  a  board  of  directors  and  officers,  the  same  as  any 
other  corporation,  but  a  "  mutual  savings  bank  "  is  managed 
by  what  is  known  as  a  board  of  trustees,  formed  by  its  organ- 
izers at  the  time  of  its  creation,  and  having  the  power  among 
themselves  to  fill  vacancies. 

M.  &  N.  Interest  or  dividends  payable  semi-annually, 
May  and  November. 

M.  &  S.  Interest  or  dividends  payable  semi-annually, 
March  and  September. 

N 

N.     The  "  ticker  "  abbreviation  for  "  new  "  or  "  North." 
Named  Cities.     Some  of  the  States,   having  passed  laws 


MONEY    AND    INVESTMENTS  267 

restricting  the  investments  of  their  savings  banks,  permit 
the  purchase  of  bonds  of  cities  in  excess  of  a  given  popula- 
tion within  a  certain  limitation  of  debt.  That  is,  the 
bonds  of  any  city  within  those  States  fulfilling  the  gen- 
eral requirements  are  considered  legal  savings  banks  in- 
vestments. There  are,  however,  certain  cities  having  a  net 
indebtedness  in  excess  of  the  prescribed  limit,  but  whose 
bonds  are  considered  desirable  investments.  These  cities, 
therefore,  are  specifically  named,  and  do  not  come  in  under 
the  general  debt  limitation.  Such  cities  are  referred  to  by 
the  investment  dealer  as  "  named  cities." 

Napoleon.  A  name  for  the  modern  French  gold  twenty- 
franc  piece,  worth  approximately  $3.86  in  United  States 
money.  It  is  a  reproduction  of  a  coin  minted  during  the 
time  of  Napoleon  Bonaparte. 

Narrow  Market.  When  there  are  extremely  few  transactions 
upon  the  stock  exchange.  This  may  be  used,  of  course,  to 
express  the  market  in  other  commodities  than  stocks.  A 
wool  merchant  might  say  that  there  was  a  very  "  narrow 
market  "  in  his  line  of  business,  which  would  indicate  that 
there  was  very  little  wool  selling. 

National  Bank.1  Incorporated  under  a  charter  granted  by 
the  United  States  Government,  by  which  it  is  given  authority 
to  receive  money  on  deposit  subject  to  check,  make  loans, 
collect  drafts,  issue  national  bank  bills  —  which  is  a  form  of 
currency,  or  money  —  and  do  the  general  business  required 
of  a  bank  which  accepts  what  are  known  as  business  deposits. 
Discounting  and  negotiating  promissory  notes,  bills  of  ex- 
change, and  other  forms  of  indebtedness,  buying  and  selling 
exchange,  making  collateral  loans,  etc.,  are  among  the  im- 
portant functions  of  such  an  institution.  In  a  limited  way,  it 
may  purchase  and  hold  real  estate.  As  a  rule,  no  interest  is 
allowed  on  deposits,  but,  of  course,  may  be  by  special  agree- 
ment. 

Formerly  the  amount  which  a  national  bank  might  loan 
to  any  one  person,  company,  or  firm,  was  limited  to  a  sum 
equal  to  10%  of  the  paid  up  capital  stock  of  the  bank.  In 
1906  this  was  changed  by  an  Act  of  Congress,  increasing  this 
limit  to  10%  of  the  capital  and  surplus,  but  in  no  event  to 
exceed  30%  of  the  capital. 

1  The  query  is  often  raised  as  to  the  right  of  a  shareholder  of  a  national 
bank  to  inspect  its  books  and  records.  The  United  States  Supreme  Court 
has  rendered  a  decision  in  effect  that  the  right  of  inspection  rests  upon  the 
primary  proposition  that  the  stockholders  of  a  corporation  own  the  prop- 
erty and  that  its  officers  are  their  agents,  and,  therefore,  that  a  share- 
holder, with  proper  motives,  may  be  permitted  to  inspect  the  books  of  such 
an  association  upon  demand,  and  can  enforce  his  right  in  the  State 
Courts. 


268  MONEY    AND    INVESTMENTS 

National  banks  are  not  permitted  to  have  branches,  which 
not  only  accounts,  in  a  large  measure,  for  the  difference  be- 
tween the  United  States  and  Canadian  banking  systems, 
but  for  the  large  number  of  small  banks  which  we  have  scat- 
tered throughout  this  country. 

No  bank  in  the  United  States,  except  one  chartered  as  above, 
is  permitted  to  have  as  a  part  of  its  name  the  word  "  National," 
and  every  such  bank,  likewise,  must  have  the  word  "  Na- 
tional "  as  part  of  its  name.1  This  is  a  protection  to  the 
public,  and  enables  every  one  to  be  assured  that  such  an 
institution  is  safe-guarded  by  national  restrictions. 

On  Nov.  12,  1906,  there  were  6,199  national  banks  in  exist- 
ence; total  resources,  $8,213,878,296.68;  paid  up  capital 
stock,  $847,514,653;  surplus  fund,  $504,548,213.62. 

The  history  of  the  national  banking  system  has  been 
marked  by  very  few  failures,  from  1863  to  Oct.  31,  1905,  only 
5£%  of  the  total  number  of  such  associations  having  been 
closed  as  the  result  of  insolvency.  In  nearly  every  case  it  was 
due  to  fraudulent  management,  or  violations  of  the  national 
banking  laws. 

Other  subjects  which  have  a  direct  bearing  upon  national 
banks,  and  to  which  the  reader  is  referred,  are:  "  Double 
Liability,"  "  Gold  Banks,"  and  the  following  six  subjects. 

National  Bank  Call.  Every  national  bank  is  required  to 
render  a  report  of  its  financial  condition  to  the  Comptroller 
of  the  Currency  at  least  five  times  a  year.  The  Comptroller 
issues  "  calls  "  for  these  reports  without  previous  notice  and 
may  do  so  at  any  time.  The  condition  of  the  banks  on  some 
given  day  previous  to  the  issue  of  the  "  call,"  and  not  after, 
is  secured.  He  may  also  "  call  "  for  a  special  report  when- 
ever he  sees  fit. 

National  Bank  Circulation.     See  National  Bank  Notes. 

National  Bank  Depository.  See  "  United  States  Depository." 

National  Bank  Examiner.  The  Comptroller  of  the  Cur- 
rency, with  the  approval  of  the  Secretary  of  the  Treasury, 
appoints  a  suitable  person,  or  persons,  to  make  an  examination 
into  the  affairs  of  every  national  bank,  who  shall  have  power 
to  make  a  thorough  examination  into  all  the  affairs  of  the 
bank,  and  shall  make  a  full  and  detailed  report  of  the  con- 
dition to  the  Comptroller. 

1 "  There  has  been  but  one  exception  to  this  rule,  that  having  been  made 
in  connection  with  the  conversion,  in  1864,  of  The  Bank  of  North  America, 
Philadelphia.  This  was  the  first  organized  bank  in  the  United  States,  and 
the  first  which  had  any  direct  relation  to  the  Government  of  the  United 
States.  When  conversion  was  effected,  favourable  consideration  was  given 
to  the  request  of  the  directors  and  other  officers  to  become  a  national  Dank 
without  change  of  title."  —  Letter  received  by  the  writer  from  the  Comptroller 
of  the  Currency,  dated  May  7,  1906, 


MONEY    AND    INVESTMENTS  269 

National  Bank  Loans.  Among  the  various  restrictions  sur- 
rounding the  subject,  there  is  one  fact  always  to  be  borne 
in  mind  by  all  parties  in  relation  to  such  a  transaction,  viz., 
that  national  banks  are,  by  law,  prohibited  from  loaning  to 
any  one  person,  firm,  or  corporation,  more  than  one-tenth 
of  its  (the  bank's)  actually  paid  in  capital  stock  and  surplus, 
but  in  no  event  to  exceed  30%  of  the  capital.  The  discount 
of  bills  of  exchange  drawn  against  existing  actual  values, 
and  the  discount  of  commercial  or  business  paper  actually 
owned  by  the  person  negotiating  the  same,  not  to  be  con- 
sidered in  the  amount  of  such  a  loan. 

National  Bank  Notes.1  In  order  to  increase  the  amount  of 
money  available  for  use,  and  at  the  same  time  produce  what 
is  known  as  an  "  elastic  currency,  "  that  is,  a  form  of  money 
which  can  be  increased  or  diminished  within  certain  limita- 
tions, as  the  exigencies  demand,  national  banks  are  author- 
ized to  take  out  "  circulation;  "  to  issue  what  are  known  as 
"  national  bank  notes,"  being  one  of  the  most  common  types 
of  paper  money  in  use  in  the  United  States.  There  must, 
however,  be  certain  security  behind  these  notes,  other  than 
the  promises  of  the  banks  to  pay,  in  order  to  protect  the  holder 
of  such  money,  and  thus  make  him  willing  to  accept  it  at  its 
face  value  without  hesitation.  The  law  requires  that  a  bank, 
for  instance,  wishing  to  issue  $100,000  in  bank  bills,  must 
first  secure  $100,000  United  States  bonds.  (No  bank  can 
issue  "  circulation  "  greater  than  its  fully  paid  up  capital 
stock.)  Any  unmatured  interest-bearing  United  States  bonds 
may  be  used,  provided  they  are  in  registered  form.  "  Circula- 
tion "  may  be  taken  out  against  these  bonds  to  the  extent 
of  their  full  face  value,  and,  in  the  case  cited,  $100,000  in  na- 
tional bank  notes  may  be  issued  by  the  bank.2  Should  the 
market  value  of  the  deposited  bonds  fall  below  par,  the 
Comptroller  may  demand  legal  tenders,  or  enough  more  bonds, 
to  fully  protect  the  notes  issued.  The  United  States'  "  prom- 
ise to  pay,"  therefore,  is  back  of  the  bank  notes,  in  addition  to 
the  assets  of  the  bank  issuing  the  same;  strengthened 
by  the  lawful  money  reserve  (see  "  Reserve ")  and  the 

'Cleveland  defines  a  "National  Bank  Note"  as:  "A  promise  of  a 
national  bank  to  pay  to  the  holder,  or  bearer,  on  presentation,  the  amount 
named  in  the  bill  in  legal-tender  money  of  the  United  States  —  i.e.  in  gold, 
silver  coins,  or  greenbacks.  This  makes  the  bank-note  indirectly  con- 
vertible into  gold  at  the  option  of  the  one  owning  or  holding  it." 

2  In  October,  1906,  the  Secretary  of  the  Treasury  announced  that  he 
would  accept  approved  securities  —  meaning  in  general  thereby,  railroad 
bonds  which  are  legal  investments  for  savings  banks  in  Massachusetts  or 
New  York  —  other  than  Government  Bonds,  for  United  States  deposits, 
to  the  amount  of  $18,000,000  with  the  understanding  that  the  United  States 
Bonds  thus  relieved  should  be  used  as  a  basis  for  increased  circulation. 
Any  bank  taking  out  such  circulation  was  required  to  retire  the  same  be- 
tween March  15th  and  August  10th,  1907. 


270  MONEY    AND    INVESTMENTS 

5%  redemption  fund.  (See  "  Five  Per  Cent.  Redemption 
Fund.") 

This  has  provided  us  with  a  safe  and  sound  currency, 
circulating  throughout  the  country  without  discount  or  dis- 
trust. It  is  immaterial  in  what  part  of  the  country  the  issuing 
bank  is  located,  whether  it  is  solvent  or  has  gone  into  the 
hands  of  a  receiver,  the  United  States  is  virtually  behind  the 
notes,  and  pledged  to  redeem  them. 

The  Government  does  not  allow  a  greater  reduction  in  the 
total  amount  of  "  national  bank  notes  "  outstanding  than 
$9,000,000  in  any  one  month.  This  does  not  apply  in  the 
case  of  bonds  called  for  redemption,  for  notes  secured  by  such 
bonds  may  be  retired.  This  provides  against  too  great  a 
contraction  in  the  currency.  It  further  provides  that  every 
bank  must  deposit  with  the  Treasurer  of  the  United  States  a 
certain  amount  of  bonds,  but  not  less  than  $50,000,  according 
to  the  amount  of  its  capital  stock.  It  is  optional  with  the 
bank  as  to  the  issuing  of  circulation  against  him,  however. 
The  Chemical  National  Bank  of  New  York  has  never  issued 
circulating  notes. 

"  National  bank  notes  "  shall  be  received  at  par  in  all 
parts  of  the  United  States  in  payment  of  taxes,  excises,  public 
lands,  and  all  other  dues  to  the  United  States,  except  duties 
on  imports;  and  also  for  all  salaries  and  other  debts  and 
demands  owing  by  the  United  States  to  individuals,  corpora- 
tions, and  associations  within  the  United  States  except  in- 
terest on  the  public  debt,  and  in  redemption  of  the  national 
currency.  They  are  not  "  legal  tender,"  and  must  not  be 
counted  in  the  "  reserve  "  of  a  national  bank.  All  national 
banks  must  receive  notes  of  other  national  banks  at  par. 
These  notes  are  redeemable  in  lawful  money  of  the  United 
States  by  the  Treasurer,  but  not  by  the  Assistant  Treasurers. 

On  Jan.  5,  1907,  the  outstanding  circulation  amounted 
to  $596,361,164.  Of  this  amount  $549,174,179  was  secured 
by  United  States  bonds,  and  the  remainder  by  a  deposit  of 
"  lawful  money." 

The  Comptroller  of  the  Currency  gives  the  following  method 
of  ascertaining  profit  on  circulation,  taking  the  2%  Consols 
as  an  example: 

"  In  calculating  the  profit  the  interest  on  the  bonds  is  added 
to  the  interest  received  on  the  circulation  loaned  at  6  per  cent., 
giving  the  total  receipts  on  an  investment  in  $100,000  worth  of 
bonds  as  $8,000.  From  the  gross  receipts  are  deducted  the 
taxes  on  circulation,  average  expenses  incident  to  cost  of 
plates,  redemption  charges,  etc.,  and  the  amount  set  aside 
as  a  sinking  fund  to  provide  for  the  premium  paid  for  the 
bonds,  the  difference  being  the  net  receipts.  Assuming  that 
the  amount  invested  —  $100,000  worth  of  bonds  —  was 


MONEY    AND    INVESTMENTS  271 

loaned  at  6  per  cent.,  the  profit  on  the  issue  of  circulating 
notes  will  represent  the  difference  between  the  interest  on  the 
amount  invested  in  bonds  and  the  net  receipts  from  the 
interest  on  bonds  purchased  and  the  amount  received  by 
loaning  the  circulating  notes." 

National  Bank  Report.    See  "  National  Bank  Call." 

National  Debt.  In  this  country,  all  outstanding  obligations 
of  every  kind  of  the  United  States  Government;  not  only 
the  bonds  of  the  Government,  but  such  other  indebtedness 
as  paper  money,  which  the  Government  promises  to  pay,  less 
the  amount  of  gold  in  the  Treasury  available  for  the  payment 
of  the  same.  (See  "  United  States  Public  Debt.") 

National  Gold  Banks.    See  "  Gold  Banks." 

National  Weather  Bulletin.  This  is  issued  by  the  United 
States  Weather  Bureau  of  the  Department  of  Agriculture, 
weekly,  from  April  first  to  the  close  of  September.  From 
October  to  March  inclusive  it  is  issued  monthly.  It  was 
formerly  known  as  the  "  Weather-Crop  Bulletin,"  but  early  in 
1906  was  changed  to  the  above  title. 

The  Bulletin  no  longer  gives  information  regarding  crops, 
as  formerly,  but  devotes  its  attention  to  meteorological  con- 
ditions. 

NB.    The  "  ticker  "  abbreviation  for  "  new  bonds." 

Negotiable.  A  security  which  can  be  transferred  from  one 
person  to  another  either  by  directly  passing  from  hand  to 
hand,  as  in  the  case  of  money,  coupon  bonds,  a  check  made 
payable  to  "  bearer  "  or  "  cash,"  etc.,  or  by  indorsement,  as 
in  the  case  of  a  note,  check,  or  draft,  payable  to  the  order  of 
a  person,  etc. 

An  instrument  or  security  which  cannot  be  passed  from  hand 
to  hand  or  is  not  good  in  the  hands  of  any  holder  except  the 
one  to  whom  it  was  originally  issued,  unless  by  the  consent 
of  the  person  or  corporation  issuing  the  same,  is  "  non-negoti- 
able." A  mileage  book,  issued  by  a  railway  company,  in  the 
name  of  John  Smith,  is  for  his  special  use  alone,  he  having  no 
right  to  sell  or  transfer  it  to  any  other  person.  It  is,  therefore, 
"  non-negotiable."  Many  railroad  tickets,  made  out  in  the 
names  of  the  holders  and  sold  at  a  discount  price,  are  "  non- 
negotiable."  The  ordinary  railroad  ticket,  bought  at  the  regular 
rate,  is  "  negotiable,"  so  is  the  theatre  ticket,  but  a  return 
check  given  to  the  person  who  leaves  the  theatre  during  the 
performance,  permitting  him  to  re-enter,  is  not  supposed  to 
be  "  negotiable."  A  note  made  payable  to  William  Black  with 
the  words  "  or  order  "  omitted  would  not  be  "  negotiable,"  be- 
cause William  Black  would  not  have  the  right  to  transfer  his 
rights  to  any  one  else.  To  him  and  him  only  was  the  note 
made  payable. 


272  MONEY    AND    INVESTMENTS 

From  the  standpoint  of  finance,  the  formal  requisites  of 
negotiable  paper  are  concisely  put  by  Francis  M.  Burdick  as 
follows: 

"  (a)  It  must  be  in  writing  and  signed;  (b)  it  must  contain 
an  unconditional  order  or  promise  to  pay  a  certain  sum  of 
money;  (c)  it  must  be  payable  at  a  determinate  time;  (d) 
it  must  be  payable  to  order  or  to  bearer;  (e)  a  bill  of 
exchange  (including  check)  must  name  or  indicate  the 
drawer." 

Negotiable   Instrument.      See    "  Negotiable." 

Negotiable  Paper.    See  "  Negotiable." 

Negotiable  Securities.  First  read  "  Negotiable,"  after  an 
understanding  of  which  "  negotiable  securities "  may  be 
defined  by  stating  that  they  are  all  forms  of  commercial  paper, 
bills  of  exchange,  drafts,  municipal,  Government  and  corpo- 
ration bonds,  and,  in  fact,  anything  that  may  be  termed  an 
investment  security  which  has  the  requisite  attributes  of 
negotiability. 

Negotiate.  To  sell,  dispose  of,  transfer,  barter,  accomplish 
a  transaction.  To  "  negotiate  a  loan;  "  to  make  a  loan,  bor- 
row money. 

An  instrument  is  "  negotiated  "  when  it  is  transferred  from 
one  party  to  another  in  such  a  manner  as  to  constitute  the 
person  to  whom  transfer  is  made  the  holder  thereof. 

Net.  A  thing  is  said  to  be  "  net  "  when  all  possible  deduc- 
tions have  been  made  from  its  totality,  and  it  is  at  its  lowest 
terms.  This  is  more  specifically  set  forth  under  "  Net  Earn- 
ings." 

Net  Avails.  As  used  in  the  discounting  of  a  note,  it  is  the 
amount  which  the  borrower  obtains  after  deducting  the  "  dis- 
count." (See  "  Discount.") 

Net  Cash.  Cash  (payment)  on  delivery,  as  distinguished 
from  "  cash,"  which  in  the  mercantile  world  is  often  taken  to 
mean  payment  in  a  short  time,  generally  ten  days.  "  Net 
cash  "  permits  of  no  discount  being  taken  from  the  face  of  the 
bill,  as  is  often  allowed  when  goods  are  sold  for  "  cash."  If 
the  term  were  used,  "  net  cash  ten  days,"  it  would  be  under- 
stood that  the  payment  was  to  be  made  within  ten  days,  but 
no  discount  was  to  be  taken  from  the  bill. 

Net  Debt.    See  "  Net  Indebtedness." 

Net  Deposits.  The  "  net  deposits  "  of  a  national  bank 
upon  which  to  figure  the  "  reserve  "  (see  that  subject)  re- 
quirements, is  obtained  by  deducting  the  checks  which  a 
bank  holds  drawn  against  other  banks  in  the  same  place,  ex- 
changes for  clearing-house  and  national  bank  notes. 

Net  Deposits  of  National  Banks.    The  total  deposits  in  all 


MONEY    AND    INVESTMENTS  273 

these  banks,  less  the  deposits  of  one  bank  in  another,  and 
any  other  duplications,  so  that  no  deposit  will  be  counted 
more  than  once. 

Net  Earnings.  The  divisible  income  applicable  to  interest 
upon  indebtedness  of  all  classes,  sinking  fund,  and  dividends 
upon  stock  of  a  corporation  or  business  industry  for  any  stated 
period  of  time.  The  method  of  bookkeeping  differs  in  various 
corporations,  and  unless  specially  noted,  so  that  the  investor 
may  not  be  deceived,  such  items  as  taxes  and  insurance  should 
be  deducted  before  the  amount  of  "  net  earnings  "  is  derived. 
It  is  generally  conceded  proper  to  deduct  such  items  and  give 
the  "  net  earnings  "  as  a  divisible  income  as  noted  above. 

Net  Income.  After  all  costs  of  operating  and  fixed  charges 
of  every  kind  have  been  deducted  from  the  earnings  of  a  cor- 
poration, the  balance,  which  is  the  amount  available  for 
dividends,  may  be  called  "  net  income." 

Net  Increase.  "  The  net  increase  in  bank  note  circulation 
last  week  was  $668,308;  "  meaning,  that  there  was  $668,308 
more  circulation  taken  out  than  retired. 

Net  Indebtedness.  The  laws  of  Massachusetts,  relating  to 
the  investment  of  savings  bank  deposits,  give  a  very  good 
definition  of  this  term  as  follows: 

"  The  words  '  net  indebtedness  '  shall  mean  the  indebted- 
ness of  a  county,  city,  town  or  district,  omitting  debts  created 
for  supplying  the  inhabitants  with  water  and  other  debts 
exempted  from  the  operation  of  the  law  limiting  their  indebt- 
edness, and  deducting  the  amount  of  sinking  fund  available 
for  the  payment  of  the  indebtedness  included." 

Of  course,  this  would  not  apply  in  all  cases,  although  the 
usual  meaning,  in  reference  to  a  municipality,  is  the  deducting 
of  the  amount  of  water  indebtedness,  if  any,  and  sinking  fund. 
In  the  case  of  a  State,  as  a  rule,  the  sinking  fund  is  about  all 
that  can  be  deducted  to  determine  the  "  net  indebtedness." 
The  net  debt  of  a  corporation  would  be  the  total  debt  less 
"  sinking  fund  "  or  money  on  hand  specially  set  aside  for 
the  payment  of  same.  In  bookkeeping  it  would  be  considered 
the  difference  between  the  assets  and  liabilities. 

Net  Price.  The  lowest  price;  the  price  less  all  discounts  or 
other  allowances. 

Net  Profits.  This  is  used  rather  more  in  a  commercial 
sense  than  "  net  earnings;  "  the  latter  being  applied  in  refer- 
ence to  railroads,  telephone  companies,  etc.  "  Profits " 
have  more  the  reference  to  the  gain  arising  from  dealing  in 
commodities,  and  is  the  gain  in  any  business  undertaking 
of  the  above  nature  after  taking  into  consideration  the 
capital  invested  in  such  an  undertaking,  all  its  expenses  in- 
curred in  management,  and  losses  sustained,  if  any. 


274  MONEY    AND    INVESTMENTS 

Again  "  net  profits  "  and  "  net  earnings  "  (see  that  subject) 
may  be  used  to  mean  one  and  the  same  thing.  Or,  in  some 
instances,  both  terms  may  be  used  in  the  same  system  of 
bookkeeping,  as,  for  instance,  "  net  profits  "  to  mean  the 
earnings  of  the  business  before  any  losses  for  bad  debts  or 
such  like  have  been  deducted,  and  "  net  earnings  "  after 
such  deduction. 

Net  Return  upon  the  Investment.  The  proportional  rate 
which  the  income  upon  any  investment  bears  to  the  total  cost, 
interest  excepted,  of  that  investment,  taking  into  consideration 
the  time  which  the  investment  may  be  outstanding  before  being 
paid  off. 

Stocks,  as  a  rule,  have  no  definite  date  of  maturity,  although 
there  are  exceptions  to  this;  therefore,  stocks  are  usually 
figured  as  perpetual.  Bonds  and  most  other  classes  of  in- 
vestments have  a  fixed  time  to  run.  In  the  former  case,  a 
simple  illustration  would  be  that  of  a  stock  selling  at  $200  per 
share,  and  paying  dividends  at  the  rate  of  8%  per  annum; 
in  which  event  the  ratio  of  the  dividend,  $8,  to  the  total 
cost,  $200,  would  be  4,  or,  in  other  words,  the  net  return  to  the 
investor  would  be  4%.  If  the  stock  sold  at  $100  per  share 
and  paid  $4  per  annum  in  dividends,  the  net  return  would  be 
4%. 

In  the  case  of  bonds  having  a  fixed  date  of  maturity,  the 
problem  is  somewhat  more  complicated,  and  special  tables 
are  in  use  to  which  investors  usually  turn  to  ascertain  what 
the  net  return  is  upon  an  investment  of  that  kind.  It  will  do 
to  take  as  an  example  a  bond  bearing  5%  interest,  and  which 
has  exactly  ten  years  to  run  before  maturity.  If  it  is  sold  at 
$108.18,  that  is  to  say,  $1,081.80  for  each  one  thousand  dollar 
bond,  the  net  return  to  the  investor  would  be  4%  per  annum, 
which  is  4%  for  each  of  the  ten  years,  and  is  4%  upon  the 
entire  sum  —  $1,081.80  —  invested. 

This  brings  up  the  point  that,  although  —  to  use  the  above 
example  —  the  bond  costs  $1,081.80,  at  the  end  of  ten  years, 
when  it  matures,  the  holder  will  only  receive  $1,000.  In  the 
meantime  he  will  have  received  $50  yearly  in  interest.  All 
of  this  $50,  therefore,  should  not  be  considered  as  income, 
for  a  sufficient  amount  of  it  should  be  set  aside  each  year  to 
liquidate  the  $81.80  premium  paid  for  the  bond. 

Some  such  expression  as  this  is  often  seen:  "  Yielding  4% 
for  the  first  ten  years  and  5%  for  all  the  time  thereafter  which 
the  bond  may  run."  This  means  that  the  municipality  or 
corporation  issuing  the  bond  has  the  right  to  pay  it  off  any 
time  after  ten  years,  but  may  not  absolutely  be  obliged  to  do 
so  until  some  later  date,  say  twenty  years.  These  are  called 
10-20  year  bonds,  or  10-20's,  meaning  that  they  are  absc 
lutely  due  in  twenty  years,  but  optional  on  the  part  of  the 


MONEY    AND    INVESTMENTS  275 

issuing  party  to  pay  any  time  between  ten  and  twenty  years. 
It  is  not  safe  on  the  part  of  the  seller  of  this  bond  to  estimate 
that  it  will  run  longer  than  ten  years.  The  greater  the  length 
of  time  which  any  form  of  indebtedness,  with  a  fixed  rate 
of  interest,  and  selling  at  a  premium,  may  be  outstanding, 
the  greater  the  percentage  in  interest  return  to  the  holder, 
at  a  given  price;  therefore,  in  the  case  of  this  10-20  year  bond, 
the  seller  figures  the  net  return  on  the  basis  of  its'  being  out- 
standing ten  years  only,  and,  in  the  case  cited,  returning  4% 
to  the  investor.  But  should  it  run  twelve  years,  for  instance, 
before  being  paid  off,  the  net  return  to  the  investor  would  be 
5%  per  annum  for  the  two  additional  years;  or,  in  other 
words,  the  full  rate  of  interest  which  the  bond  bears. 

The  shorter  the  length  of  time  which  a  bond  has  to  run 
when  selling  at  a  discount,  the  greater  the  interest  return  to 
the  investor,  prices  being  equal;  just  the  opposite  from  a  bond 
selling  at  a  premium. 

In  the  selling  of  bonds  and  figuring  the  interest  return, 
or  yield,  the  following  rule  must  always  be  observed,  if  the 
issue  is  "  optional,"  so-called,  as  in  the  case  of  the  10-20  year 
bond  just  mentioned. 

Rule  For  Computing  the  Interest  Yield  Upon  Optional  Bonds 

For  bonds  selling  at  a  premium,  the  interest  return 
must  be  computed  upon  the  shortest  possible  time 
which  the  security  may  be  outstanding.  For  bonds 
selling  at  a  discount,  the  interest  return  must  be  com- 
puted upon  the  basis  of  the  greatest  possible  length  of 
time  which  they  may  be  outstanding. 

In  buying  an  issue  of  "  serial  bonds  "  (see  that  subject) 
many  bidders  make  the  mistake  of  averaging  the  life  of  the 
issue,  and  then,  by  the  use  of  a  table  of  bond  values,  basing 
the  bids  upon  this  average  maturity;  whereas,  a  separate 
bid  should  be  computed  for  each  maturity  and  then  an 
average  price  taken.  If  bonds  are  bought  by  the  first  method 
and  retailed  by  maturities,  either  a  loss  will  result,  or  a  lesser 
profit  than  expected. 

How  to  compute  the  average  life,  or  maturity,  of  a  lot  of 
bonds  falling  due  at  different  intervals,  is  best  explained 
by  the  following  example. 

To  find,  on  March  1,  1907,  the  average  maturity  of 

$  5,000  (par  value)  due  July  1,  1910 

8,000       "      "          "      "     1,  1912 

10,000       "      "          "      "     1,  1915 

7,000       "      "          •       "     1,  1920 


276  MONEY    AND    INVESTMENTS 

From  March  1,  1907,  to  July  1,  1910  is  3J  years.  Likewise, 
for  the  subsequent  periods  the  time  is  5£  years,  8J  years,  13 j 
years. 

Three  ciphers  may  be  struck  out  of  each  of  the  par  value 
amounts,  and  we  have  the  following: 

5  x  3|  =  16$ 

8x  5i  =  42J 

10  X  8J  =  83i- 

7x  134  =  93; 


Adding  =  30  236 

Dividing  the  footing  of  the  right-hand  column  by  the  footing 
of  the  left-hand,  the  average  maturity  is  obtained;  namely, 
7  87-100  years. 

The  reader  will  do  well  to  familiarize  himself  with  the  matter 
under  "  Bond  Values  Tables." 

Net  Surplus.  The  profits  which  are  left  after  paying  all 
the  expenses  of  operating,  taxes,  insurance,  interest  on  debts 
of  all  kinds,  sinking  fund,  if  any,  and  dividends.  As  distin- 
guished from  "  surplus,"  the  latter  would  be  before  making 
deductions  for  dividends;  "  net  surplus,"  after  deducting 
dividends.  Some  writers  figure  that  preferred  dividends 
should  be  deducted  before  arriving  at  the  "  net  surplus," 
but  not  dividends  on  the  common  stock. 

Net  Worth.  The  difference  between  what  a  concern  owns 
and  what  is  due  to  it,  and  what  it  owes  to  others,  is  the  "  net 
worth;  "  the  excess  of  its  assets  over  its  liabilities. 

New.  A  Chicago  Board  of  Trade  term,  which  has  reference 
to  new  grain,  and  is  inserted  in  each  certificate  of  inspection 
of  a  newly  harvested  crop  of  oats  until  the  fifteenth  day  of 
August;  of  rye,  until  the  first  day  of  September;  of  wheat, 
until  the  first  day  of  November;  and  of  barley  until  the  first 
day  of  May,  of  each  year. 

New  Account.  "  For  the  new  account;  "  for  the  next  ac- 
count; that  is,  in  London,  transactions  which  are  not  con- 
summated on  the  "  fortnightly  settling-days "  would  be 
understood,  by  this  term,  to  go  forward  into  the  next  "  fort- 
nightly settlement." 

Newfoundland  Government  Cash  Notes.  Issued  by  that 
Government  in  making  payments  on  account  of  public  works 
in  the  outlying  districts  of  the  island.  Their  circulation  is 
limited,  and  they  are  not  re-issued  when  once  deposited  in 
the  Bank  of  Montreal,  at  St.  John's,  Newfoundland,  where 
they  are  redeemable.  They  are  in  denominations  of  $5,  $1, 
80  cents,  50  cents,  and  40  cents,  payable  to  bearer.1 

1  Information  furnished  by  the  Bank  of  Montreal,  Canada. 


MONEY    AND    INVESTMENTS  277 

New  Haven.    New  York,  New  Haven  &  Hartford  R.  R.  Co. 

New  Jersey  Collateral  Inheritance  Tax.  vAs  so  many  com- 
panies have  been  incorporated  under  the  laws  of  New  Jersey, 
all  executors  or  administrators  of  estates  of  non-residents  of 
New  Jersey  should  bear  in  mind  that  there  is  a  "  collateral 
inheritance  tax  "  levied  on  that  part  of  the  decedent's  estate 
which  goes  by  will  or  by  intestate  laws  to  any  one  not  a  parent, 
brother,  sister,  husband  or  wife  or  direct  descendant  of  the 
decedent.  This  applies  to  the  stocks  of  New  Jersey  corpora- 
tions, which  pass  from  a  decedent  non-resident,  and  relates 
only  to  the  stock  of  the  value  of  $500  or  over.1  This  value 
applying  to  each  lot  and  not  to  the  amount  of  the  estate. 

New  Reserve.  Under  the  subject  "  Reserve  "  it  will  be 
seen  that  in  1902  the  Secretary  of  the  Treasury  made  a  ruling 
permitting  national  banks  to  forego  the  necessity  of  main- 
taining a  25%  "  reserve  "  against  deposits  of  public  money 
secured  by  Government  bonds.  "  New  Reserve,"  therefore, 
means  the  amount  of  "  reserve  "  held  by  one  bank,  or  the 
banks  collectively,  after  taking  advantage  of  the  Secretary's 
ruling,  and  the  legal  requirement  is,  therefore,  £  of  all  de- 
posits, minus  \  of  the  United  States  deposits.  "  Old  reserve  " 
would  be  against  all  deposits,  including  that  of  the  Govern- 
ment, and  would  call  for  \  of  the  total  deposits.  In  the  New 
York  Clearing-House  "  new  reserve  "  is  referred  to  as  "  re- 
serve on  deposits  other  than  the  United  States."  "  Old  re- 
serve "  is  referred  to  as  "  reserve  on  all  deposits." 

New  York  Balances.  "  Clearing-House  Balances  "  for  New 
York  City. 

New  York  balance  —  note  that  the  "  s  "  on  the  last  word 
is  omitted  —  refers  to  the  amount  on  deposit,  in  New  York, 
to  the  credit  of  a  bank  or  other  corporation,  firm,  or  individual 
located  elsewhere. 

New  York  Consolidated  Stock  and  Petroleum  Exchange. 
See  "  Consolidated  Exchange." 

New  York  Consolidated  Stock  Exchange.  See  "  Consolidated 
Exchange." 

New  York  Cotton  Exchange.  Where  speculation  or  trading 
in  cotton  goes  on  in  New  York.  Founded  in  1870  and  the 
largest  of  its  kind  in  this  country. 

New  York  Equivalent.  The  price  at  which  a  security  in 
New  York  equals  the  London  quotation,  taking  into  con- 
sideration cost  of  shipment,  rate  of  exchange,  loss  of  interest 
and  incidentals.  This  is  so  accurately  understood  that  tables 
are  used  by  which  the  "  New  York  equivalent  "  of  a  London 

1  Chapter  210  of  the  Laws  of  1894,  as  amended  by  Chapter  62  of  the 
Laws  of  1898,  Chapter  217  of  the  Laws  of  1902,  and  Chapters  227  and  228 
of  the  Laws  of  1906. 


278  MONEY    AND    INVESTMENTS 

quotation  can  be  quickly  ascertained,  whatever  the  rate  of 
exchange.  All  London  quotations  of  securities  dealt  in  in 
America  must  be  reduced  to  their  "  New  York  equivalent  " 
to  be  of  any  comparative  value  in  this  country.  This  has  more 
particular  reference  to  what  are  known  as  "  international 
securities."  (See  also  "  New  York  Stock  Exchange  Usage.") 

New  York  Excess.  New  York  being  a  "  central  reserve 
city  "  banks  there  act  as  depositories  for  national  banks  of 
other  cities.  Those  being  located  in  what  are  known  as 
"  reserve  cities  "  must  maintain  a  "  reserve  "  of  25%  of  their 
net  deposits,  but  they  are  permitted  to  deposit  one  half  of  this 
25%  with  a  bank  in  a  "  central  reserve  city,"  after  having  the 
same  approved  by  the  Comptroller  of  the  Currency  as  their 
"  reserve  agent."  "  New  York  Excess,"  therefore,  means  the 
amount  of  money  on  deposit  with  a  "  reserve  agent  "  there  in 
excess  of  the  one  half  referred  to. 

New  York  Exchange,  Funds,  or  Money.  (See  "  Exchange.") 
In  addition  to  what  is  given  under  "  Exchange  "  upon  this 
subject,  it  would  be  well  for  the  reader  to  understand  that 
New  York,  being  the  great  financial  centre  of  this  country,  it 
is  through  that  centre  that  payments  are  being  continually 
made,  and  there  is,  therefore,  constantly  a  transmitting  of 
funds  to  and  from  that  point  to  all  other  points  of  the  country, 
the  lines  along  which  the  streams  of  money  flow  in  and  out 
radiating  like  the  spokes  of  a  wheel.  A  check  on  New  York  is 
acceptable  at  all  points,  and,  for  this  reason,  New  York  Ex- 
change is  seldom  at  a  discount.  If  it  is  desirable  to  use  a  check 
in  making  a  payment  between  two  country  points,  the  best 
form  of  check  to  send  is  a  check  on  a  New  York  bank,  as  that 
will  be  most  useful  to  the  recipient. 

New  York  Exchange  Was  Par  at  Chicago.  When  such  a 
statement  as  this  is  made,  it  means  that  the  demand  at  Chicago 
for  exchange  on  New  York,  i.  e.  "  New  York  funds,"  was  just 
about  equal  to  the  supply;  the  Chicago  banks  carrying  de- 
posits in  New  York  City  were  perfectly  willing  to  exchange, 
without  charge,  checks  against  those  accounts  for  cash  or 
checks  on  local  banks. 

New  York  Method  of  Figuring  Interest.    See  "  Interest." 

New  York  Produce  Exchange.  This  corresponds  to  the 
Chicago  Board  of  Trade,  and  it  is  where  transactions  in  grain, 
pork,  lard,  etc.,  take  place. 

Since  April  15,  1907,  trading  in  certain  mining,  industrial, 
and  miscellaneous  securities  has  taken  place  on  this  exchange, 
but  no  security  listed  upon  the  New  York  Stock  Exchange 
is  included  in  the  "  list." 

New  York  Stock  Exchange.  (See  "  Stock  Exchange.") 
This  is  a  voluntary  association,  not  corporation. 


MONEY    AND    INVESTMENTS  279 

New    York    Stock    Exchange    Commission    Charges.     See 

"  Commission." 

New  York  Stock  Exchange  Usage.  In  all  transactions  upon 
the  New  York  Stock  Exchange  where  the  face  value  of  a 
security  is  expressed  in  English  pounds  sterling,  the  trans- 
actions are  figured  at  $5.00,  equivalent  to  one  pound  sterling, 
without  regard  to  the  "  rate  of  exchange  "  or  the  actual 
equivalent  in  dollars  and  cents  to  the  pound  sterling.  In  all 
such  transactions,  an  allowance  has  to  be  made  for  the  actual 
difference  arising  from  the  "  usage."  (See  also  "  New  York 
Equivalent.") 

In  the  same  manner,  on  the  London  Exchange,  United 
States  securities  are  reckoned  at  the  rate  of  $5.00  to  the 
pound,  Dutch  at  12  guilders,  French  and  Italian  at  25  francs 
and  25  lire  respectively,  and  German  at  20  marks. 

New  2's.  United  States  Government  2%  bonds  redeemable 
after  1930,  and  known  as  "  Consols."  (See  "  Government 
Bonds.") 

New  a's.  United  States  Government  3%  bonds  redeemable 
after  August  1,  1908,  and  known  as  "  Loan  of  1908-1918." 
(See  "  Government  Bonds.") 

NF.  The  "  ticker  "  abbreviation  for  "  non-fundable." 
These  letters,  when  stamped  upon  a  check,  stand  for  "  no 
funds."  (See  that  subject.) 

N.  F.  M.  A.  November,  February,  May,  and  August; 
interest  or  dividends  payable  quarterly  beginning  with 
November. 

Nickel.  A  small  coin  of  the  United  States  of  the  value  of  5 
cents,  containing  57.87  grains  of  fine  copper  and  19.29  grains 
of  nickel.  "  Legal  tender  "  to  the  extent  of  25  cents. 

Nickel  Coins.    See  last  subject. 

Nickel  Plate.  The  New  York,  Chicago  &  St.  Louis 
R.  R.  Co. 

Ninety  Day  Bill.  A  bill  of  exchange  (see  "  Exchange  ") 
may  be  drawn  payable  in  ninety  days  after  date,  but  it  is  more 
customary  to  draw  them  payable  ninety  days  "  after  sight;  " 
that  is,  after  presentation.  If  in  the  latter  form  and  drawn  on 
England,  roughly  speaking,  ten  days  may  be  reckoned  as  the 
time  elapsed  after  drawing  before  presentation,  and  as  the 
three  days  "  grace  "  is  allowed  there  on  time  bills,  it  would 
make  a  total  of  approximately  one  hundred  and  three  days 
before  actual  maturity. 

Bills  of  this  kind  are  called  "  Nineties." 

No  Account.  Stamped  across  a  check  to  show  that  the 
"  drawer  "  has  no  account  at  the  bank  against  which  it  was 
drawn. 


280  MONEY    AND    INVESTMENTS 

No  Funds.  When  stamped  upon  a  check  returned  from  the 
bank  at  which  it  is  payable  it  indicates  that  the  "  drawer  " 
had  no  money  to  his  credit  to  meet  its  payment.  The  letters 
N.  F.  are  often  used  to  indicate  the  same  thing. 

Nominal  Assets.  Although  by  this  is  especially  understood 
property  of  uncertain,  undetermined,  or  of  no  value,  yet  it  is 
also  extended  to  mean  assets  (property)  of  all  kinds,  belonging 
to  a  person,  firm,  or  corporation.  (See  "  Assets.") 

Nominal  Exchange.  This  takes  no  account  of  "  balance  of 
trade,"  and  such  transactions  between  countries;  but  is  ex- 
change based  only  upon  the  comparative  market  values  of  the 
currencies  of  the  different  countries. 

Nominal  Par.  The  actual  face  value  of  a  security.  See 
"  Par." 

Nominal  Price.  A  market  quotation  which  is  not  based  on 
an  actual  transaction,  but  rather  indicates  the  probable  price 
which  might  be  obtained  at  the  time. 

Nominal  Rates.     See  "  Posted  Rates." 

Non-Assented.  Securities,  the  holders  of  which  have  not 
agreed  to  a  certain  plan,  as  one  of  "  reorganization,"  for 
illustration.  (See  "  Assented  Stocks.") 

Non- Assessable.  Stock,  the  owners  of  which  cannot  legally 
be  compelled  to  make  additional  payments  upon  the  same, 
in  case  of  failure  of  the  corporation,  or  for  any  other  reason. 
National  bank  stocks  are  "  assessable  " 1  (See  "  Double 
Liability  ");  that  is,  the  owners  can  be  forced  to  make  addi- 
tional payments  in  case  of  failure.  It  often  states  on  a  stock 
certificate  that  it  is  "  non-assessable,"  if  such  is  the  case. 
The  State  laws  under  which  the  corporation  is  chartered  may 
have  much  to  do  with  the  assessability  or  non-assessability  of 
the  stock.  Assessments  may  be  made,  in  case  it  can  be  proved 
that  a  certain  stock  had  not  been  "  fully  paid  "  when  originally 
issued,  and  the  existence  of  fraud  demonstrated;  provided, 
of  course,  that  the  laws  demanded  the  issuance  of  "  fully  paid  " 
stock. 

In  case  of  the  shares  of  a  transportation  company,  the  holder 
of  which  may  be  liable  for  "  assessment,"  considerable  risk 
may  attend  the  owning  of  the  same.  Some  large  accident 
might  involve  the  company  in  such  "a  loss  for  damages,  as  to 
call  for  an  "  assessment."  This  liability  should  always  be 
given  proper  thought  in  buying  any  stock.  No  stock  carries 
more  than  "  double  liability."  Never  "  indorse  in  blank  " 
a  stock  subject  to  assessment,  but  have  it  transferred  to  the 
purchasing  party.  (See  "Transfer  in  Blank.") 

Non-Clearing-House  Stocks.    This  is  fully  explained  under 

1  For  exceptions  see  foot-note  under  "  Double  Liability." 


MONEY    AND    INVESTMENTS  281 

"  Stock  Exchange  Clearing-House."  Stocks  which  are  not 
active,  and  which  are  not  "  cleared  "  is  understood. 

Non-Contingent  Preference  Stock.  Described  under  "  Pre- 
ferred Shares." 

Non-Cumulative.  First  read  matter  under  "  Cumulative." 
In  the  case  of  a  "  non-cumulative  "  stock,  if  a  dividend  is  not 
paid  at  its  regular  fixed  period,  there  is  no  obligation  on  the 
part  of  the  corporation  to  make  the  amount  up  at  any  succeed- 
ing time;  for  instance,  a  given  stock  is  known  as  "  a  7%  non- 
cumulative,"  and  during  the  year  1904  it  paid  dividends  at 
the  rate  only  of  3%,  the  holder  of  that  stock  has  no  right  to 
expect  the  additional  4%  to  be  paid  him  at  any  future  time. 

All  shares  are  "  non-cumulative  "  unless  otherwise  stated. 
If  the  entire  stock  issue  of  a  company  is  simply  one  class  of 
"  common  "  there  would  be  no  object  in  injecting  the  "  non- 
cumulative  "  feature. 

Non-Interest-Bearing.  Securities  which  do  not  earn  (pay) 
interest. 

Non-Ledger  Assets.  Property  owned  but  not  appearing  on 
the  books  of  a  business;  concealed  assets  or  profits. 

Non-Member  Banks.  Those  not  belonging  to  the  Clearing- 
House  Association,  but  which  "  clear  "  through  some  bank 
which  is.  (See  "  Clearing-House  Agent.")  "  Non-members  " 
are  subject  to  certain  rules  and  restrictions  of  the  clearing- 
house, such  as  making  a  weekly  statement,  which  is  published 
the  same  as  the  member  banks.  (See  second  paragraph  of 
"  Bank  Statement.")  Trust  companies  in  New  York  are  re- 
quired to  make  a  statement  of  their  condition,  so  the  state- 
ment of  the  "  non-member  banks  "  covers  banks  only. 

Non-Member  Bank  Statement.  See  second  paragraph  of 
"  Bank  Statement." 

Non-Negotiable.     See  "  Negotiable." 

Non-Participating  Policy.  This  kind  of  a  life  insurance 
policy  is  one  under  which  the  holder  has  no  right  to  share  in 
the  surplus  earnings  of  the  company,  as  explained  under 
"  Participating  Policy." 

Non-Taxable  Investments.  Investments  which  are  not 
subject  to  taxation.  United  States  Government  bonds  are 
non-taxable  in  all  parts  of  this  country,  not  being  subject  to 
either  Government  or  municipal  taxation. 

The  State  laws  vary  greatly  as  to  the  taxation  of  other 
securities;  in  some  States  there  exist  what  is  known  as 
"  double  taxation;  "  that  is,  suppose  John  Smith  owns  a  piece 
of  real  estate  upon  which  he  is  taxed  at  a  valuation  of  $10,000; 
he  gives  a  mortgage  on  the  same  property  to  Richard  Jones 
for  $7,000;  this  mortgage  is  taxed  for  that  amount,  making 


282  MONEY    AND    INVESTMENTS 

a  total  taxation  upon  the  same  property  of  $17,000;  $7,000 
of  it  is  taxed  twice. 

An  example  of  non-taxable  securities  is  best  given  by 
selecting  the  Commonwealth  of  Massachusetts,  which  provides 
that  such  investments  as  bonds  and  mortgages  secured  entirely 
by  real  estate  situated  within  the  Commonwealth,  stocks  of 
all  Massachusetts  corporations,  besides  certain  other  securi- 
ties especially  exempted  by  law,  are  non-taxable  when  held 
within  the  Commonwealth. 

No  Protest.  These  words  are  sometimes  marked  upon  a  note 
or  draft,  and  convey  to  the  party  entrusted  to  collect  it  the 
instructions  not  to  "  protest  "  (see  that  subject)  if  payment 
is  refused. 

North  Butte.     North  Butte  Mining  Co.  (Copper.) 

Northwestern.     Chicago  &  Northwestern  Railway  Co. 

Northwesterly  Receipts.  Usually  designates  receipts  of  hard 
spring  wheat  of  Minnesota  and  the  Dakotas,  at  Duluth  and 
Minneapolis. 

Not  a  Delivery.  Same  as  "  Not  a  Good  Delivery."  (See 
"  Good  Delivery.") 

Notary  Public.  One  who  receives  a  commission  from  the 
State  and  is  empowered  to  take  acknowledgments,  deposi- 
tions, administer  oaths,  protest  negotiable  instruments,  etc. 

Note.  A  written  promise  to  pay  a  specified  sum  of  money  at 
some  future  time.  The  various  kinds  of  notes,  "  demand  " 
"  time,"  etc.,  will  be  found  explained  under  the  several 
subjects.1 

The  requirements  of  a  note  are:  that  the  amount  for 
which  it  is  drawn  shall  be  clearly  stated;  that  it  shall  be  made 
payable  at  some  determinable  time;  and  that  it  shall  be  signed 
and  dated.  If  the  words  "  with  interest  "  are  inserted  with- 
out mentioning  the  rate,  then  the  legal  rate  of  the  State  in 
which  it  is  made  prevails. 

A  note  in  the  hands  of  any  "  holder  in  due  course  "  (see 
that  subject)  may  be  voidable  for  either  of  the  following  rea- 
sons: if  altered  by  the  holder,  or  signed  by  a  minor;  and  may 
be  voidable  when  in  the  hands  of  the  party  to  whom  first  given 
for  the  following  reasons:  dated  and  issued  2  on  Sunday;  if 
the  maker  was  under  the  influence  of  liquor;  or  his  signature 
to  the  note  obtained  by  fraud. 

In  case  a  note  is  destroyed,  lost,  or  stolen,  the  holder  can 
legally  collect  from  the  maker. 

If  there  is  a  disagreement   between   the   words   and   the 

1  See  also  "  Value  Received,"  "  Discount,"  "  Interest  to  Follow,"  "  On 
or  Before/'  "  Indorse,"  and  "  Collateral  Loan." 

2  As  a  matter  of  precaution  it  is  better  not  even  to  date  a  note  on  Sunday, 
although  it  is  not  voidable  in  any  State  on  account  thereof. 


MONEY    AND    INVESTMENTS  283 

figures  for  the  amount  for  which  a  note  is  drawn,  the  former 
governs,  the  same  as  in  a  check. 

Always  present  a  note  on  the  exact  day  it  is  due  and  at  the 
place  specified  for  payment.  When  no  place  is  named,  it  may 
be  presented  at  the  maker's  place  of  business  or  residence. 
The  reason  for  presenting  a  note  on  the  day  of  its  maturity 
is  to  hold  indorsers  or  guarantors,  if  any.  The  liability  of  the 
maker  is  not  lessened  by  a  delay  in  presentation. 

In  purchasing  a  note  which  has  been  running  some  time, 
be  sure  to  ascertain  if  any  payments  have  been  made  upon  it, 
as  neglect  to  indorse  the  same  upon  the  note  may  have 
occurred.  Direct  application  to  the  maker  for  this  informa- 
tion may  be  made  if  advisable.  All  partial  payments  on 
notes  should  be  carefully  entered  upon  the  back  of  the  same, 
giving  the  amount  and  date  of  payment.  No  signature  is 
necessary.  It  is  well  to  prefix  the  words  "  Received  on  the 
within  note,"  "  Received  on  this  note,"  or  some  such  form. 

Should  payment  of  a  note  not  be  made  when  due,  notice  must 
immediately  be  sent  to  the  indorsers  or  guarantors,  unless 
some  clause  is  inserted  whereby  the  indorsers  or  guarantors 
waive  this  right  of  notice. 

The  purchase  of  overdue  notes  is  an  unsafe  proceeding. 
(See  also  "  Protest.") 

Notes  falling  due  on  Sunday,  or  a  legal  holiday,  in  most 
States  are  payable  on  the  next  business  day.  As  this  varies 
in  different  States  it  is  advisable  to  look  it  up  in  absence  of 
certain  knowledge. 

If  days  of  grace  are  recognized  and  the  last  day  of  grace 
falls  on  Sunday  or  a  legal  holiday,  the  instrument  is  payable 
on  the  day  preceding. 

SIMPLE  FORM  OF  TIME   NOTE:1 

Boston,  Mass.,  Jan.  1,  1907 

£4 


Five  months after  date  we  promise   to  pay 

to  the  order  of  Robinson  Brothers 

Three  hundred  fifty &ffio  Dottars 

Payable  at  Tidewater  National  Bank,  Jacksonville,  Fla. 

Value  received 

No. T)UP.        Brown  &  White. 

1  If  the  note  is  to  be  made  payable  "  on  demand  "  these  words  may  be 
inserted  in  the  place  of  "  after  date."    The  form  of  note  given  above  is 


284  MONEY    AND    INVESTMENTS 

"  Note "  often  is  applied  to  money,  as  "  bank-note," 
"  United  States  note,"  "  Bank  of  England  note,"  etc. 

Note  Broker.  One  who  deals  in  "  commercial  paper  "  or 
short-time  evidences  of  indebtedness  of  a  similar  nature;  the 
"  middleman  "  through  whom  one  party  borrows  money  from 
another  by  negotiating  his  notes.  The  "  note  broker  "  either 
charges  a  commission  for  his  services,  or  buys  the  note  bearing 
(or  discounted  at)  one  rate  of  interest  and  sells  at  a  lesser;  the 
difference  of  interest  for  the  time  the  note  has  to  run  being  his 
profit. 

Note  of  Hand.    Same  as  "  note." 

Note  Panic.  In  this  connection  "  note  "  refers  to  paper 
money.  A  "  note  panic  "  results  from  the  holders  of  a  bank's 
notes  losing  confidence  in  the  ability  of  the  bank  to  redeem 
them  at  par.  An  illustration  is  that  of  the  Bank  of  Eng- 
land, which  has  had  several  such  troublesome  experiences. 
During  one  of  these  "  panics,"  when  the  holders  of  the  bank's 
notes  lost  their  heads  and  a  "  run  "  on  the  bank  resulted, 
payment  was  made  in  such  small  money  as  shillings  and  six- 
pence in  order  to  gain  time. 

Notes  Payable.  All  written  agreements  in  every  form  which 
a  person  has  entered  into,  and  which  are  held  by  others,  and 
which  bind  such  a  person  to  pay  sums  of  money  at  some 
future  time  —  either  on  demand  or  a  fixed  date.  Examples: 
notes,  acceptances,  etc.  All  written  evidences  of  indebtedness 
held  against  a  concern  are  the  "  notes  payable  "  of  that  con- 
cern. (See  "  Bills  Payable.") 

Notes  Receivable.  All  written  agreements  in  every  form 
which  one  person  holds  against  others,  and  which  bind  them 
to  pay  him  money  at  some  future  time  —  either  on  demand 
or  a  fixed  date.  Example:  drafts,  notes,  or  acceptances. 

Note  Teller.  An  employee  only  required  in  the  larger  bank- 
ing institutions.  He  is  the  one  who  attends  to  the  collection 
of  notes  due  the  bank,  and  attends  to  the  collection  of  notes 
or  drafts  belonging  to  the  bank's  customers,  and  entrusted 
to  it  for  collection.  Also  called  the  "  Third  Teller." 

Notice  of  Dishonour.  If  any  negotiable  paper,  such  as  a 
draft,  is  not  paid  at  maturity,  a  written  notice  to  that  effect 
from  the  holder  to  the  "  drawer  "  or  "  indorser  "  is  a  "  notice 
of  dishonour."  l 

when  the  interest  is  deducted  in  advance;  that  is,  at  the  time  of  making— 
"  discounted."  If  a  form  of  note  is  wanted  with  interest  payable  at  ma- 
turity, words  may  be  inserted  after  the  word  "  dollars,"  as:  "  with  interest 
at5%." 

1  Francis  M.  Burdick  says:  "A  protest  ...  is  necessary  only  in  the 
case  of  a  foreign  bill  of  exchange;  but  a  notice  of  dishonour  is  just  as  neces- 
sary in  the  case  of  an  inland  bill, of  a  check,  or  of  a  promissory  note  as  in 
the  case  of  a  foreign  bill.  A  protest  is  in  writing,  and  attested  by  the 


MONEY    AND    INVESTMENTS  285 

Notice  of  Protest.    See  "  Protest." 

Noting  a  Bill.  The  writing  upon  a  "  bill  of  exchange,"  or 
other  negotiable  paper,  which  has  not  been  paid  or  "  ac- 
cepted," words  to  the  effect  that  it  has  been  dishonoured. 
After  this  it  may  be  "  protested." 

Not  Subject  to  Previous  Redemption  (or  Call.)  A  security 
which  the  issuer  has  no  right  to  pay  off  previous  to  the  date 
of  maturity  specified  therein. 

NS.    The  "  ticker  "  abbreviation  for  "  new  series." 

N.  &  M.  November  and  May;  interest  or  dividend  payable 
semi-annually  beginning  with  November. 


0 

O.  The  "  ticker  "  abbreviation  for  offered,  when  accom- 
panied by  figures,  as  "  UPO.  150,"  means  that  Union  Pacific 
common  stock  was  offered  at  $150  per  share.  Frequently 
such  a  combination  as  this  is  seen:  "  UP.  150,  O.  150"  which 
indicates  that  Union  Pacific  was  sold  at  150  and  more  was 
afterwards  offered  at  same  price,  but  no  bidder  or  purchaser 
materialized. 

Oats.  This  is  explained  under  "  Grain,"  except  that  the 
trading  unit  is  5,000  bushel  lots  and  the  "  margin  "  about 
3  cents  per  bushel,  the  commission  being  the  same  as  any 
other  grains. 

Oats  Pit.     See  "  Pit." 

OB.  The  "  ticker  "  abbreviation  for  "  opening  of  books." 
(This  is  explained  under  "  Books  Open.") 

Obligation.  This  is  a  term  for  indebtedness,  and  has  a  very 
general  use.  Bonds  of  municipalities,  corporations,  or  of  any 
nature,  may  be  referred  to  as  "  obligations;  "  so  may  an  in- 
debtedness of  any  form.  (See  "  Direct  Obligation.") 

Odd  Lots  (or  Odd-Share  Lots).    See  "  Fractional  Lots." 

Off.  Lower  prices.  Also  used  to  denote  "  without,"  as 
"  dividend  off,"  meaning  "  without  dividend." 

Off  Coast.  Vessels  in  port  awaiting  orders  to  discharge 
cargoes  or  to  proceed  to  some  other  port. 

Offer.  A  bid;  an  offer  to  buy.  (See  also  "  Bids  and 
Offers.") 

notary's  signature  and  seal.  A  notice  of  dishonour  may  be  in  writing  or 
oral,  and  may  be  given  personally  or  sent  through  the  mails.  It  may  be 
quite  informal.  Any  notice  is  sufficient  which  fairly  identifies  the  in- 
strument and  indicates  that  it  has  been  dishonoured.  Of  course,  it  is  safer 
to  have  the  notice  in  writing,  in  order  to  avoid  any  dispute  about  its  terms." 


286  MONEY    AND    INVESTMENTS 

Offered  Down.  Offered  (an  offer  to  sell)  at  less  than  the 
last  quotation  of  the  same  security. 

Offered  Firm.  There  is  a  distinction  between  "  offered  firm  " 
and  "  subject  to  sale  "  (the  meaning  of  the  latter  is  set  forth 
under  the  subject  of  that  heading),  but  in  the  case  of  "  offered 
firm  "  one  offers  to  sell  another  certain  securities,  or  anything 
else  for  that  matter,  giving  definite  time  for  the  acceptance  of 
the  offer.  Or,  one  may  make  an  offer,  that  is,  a  bid,  that  in 
turn  will  be  good  for  a  definite  time;  in  which  event  it  is 
known  as  a  "  firm  bid."  Anything  may  be  "  offered  firm  for 
three  days,"  by  which  the  intending  purchaser  has  that  length 
of  time  to  decide  in;  or  a  bid  may  be  made  "  firm  "  for  that 
length  of  time,  and  is  known  as  "  firm  bid  for  three  days." 

Official  List.  The  London  term  which  is  the  equivalent  to 
our  "  List,"  to  which  refer. 

Official  Minimum.  The  "  discount  "  rate  of  some  of  the 
large  foreign  banks,  such  as  the  Bank  of  England,  is  known  as 
the  "  official  minimum."  (See  "  Bank  of  England  Discount 
Rate." 

Official  Time.    See  "  Hammond's  Time." 

Offset.  Sometimes  notes  bear  the  words  "  without  offset," 
meaning  that  if  the  person  holding  the  note  meets  with 
financial  disaster  he  cannot  use  the  note  as  an  "  offset  " 
against  any  sum  which  he  may  happen  to  owe  the  person  who 
signed  the  note. 

Dictionary  meaning:  To  set  one  account  against  another; 
to  make  the  account  of  one  party  pay  the  demand  of  another; 
a  sum,  account,  or  value  set  off  against  another  sum  or  ac- 
count as  an  equivalent. 

O.  J.  A.  J.  October,  January,  April  and  July;  interest  or 
dividends  payable  quarterly  beginning  with  October. 

O.  K.  (or  O.  Ked).  When  marked  upon  a  paper  it  signifies 
that  it  is  correct  to  the  satisfaction  of  the  person  who  placed 
the  letters  thereon.  He  is  said  to  have  "  O.  Ked  "  it. 

Old  Dominion.    Old  Dominion  Mining  Co.    (Copper.) 

Old  Lady  of  Threadneedle  Street.    Bank  of  England. 

Old  Line  Insurance.  Life  insurance  upon  which  the  premium 
is  fixed  (see  "  Level  Premium  ");  not  changing  from  year  to 
year,  but  determined  once  for  all  by  the  age  of  the  insured 
when  he  makes  his  first  payment,  and  which  maintains  a 
yearly  increasing  reserve,  something  like  a  sinking  fund,  to 
meet  the  claims  at  a  given  time. 

Old  Reserve.    This  is  explained  under  "  New  Reserve." 

On  Account.  A  partial  payment  of  an  amount  due  is  a 
payment  "  on  account." 

On  a  Scale.  See  "Buying  on  a  Scale  "  and  "Selling  on  a  Scale." 


MONEY    AND    INVESTMENTS  287 

On  Call.  This  will  be  understood  by  reading  "  Demand 
Note."  It  has  reference  to  money  or  anything  "  subject  to 
call;  "  subject  to  demand  for  immediate  delivery  or  pay- 
ment. 

On  'Change.  On  the  stock  exchange,  or  on  any  other  kind 
of  an  exchange. 

One-Name  Bill.  A  bill  of  exchange  (see  "  Exchange  ") 
which  has  only  one  signature  and  is  without  indorsements, 
and  has  not  been  "  accepted." 

One-Name  Paper.     Same  as  "  Single-Name  Paper." 

On  or  Before.  This  expression  is  used  in  reference  to  a  form 
of  borrowing  where  an  agreement  exists  between  the  lender 
and  the  borrower  that  the  note  shall  run  for  a  definite  period, 
and  that  the  lender  shall  not  have  the  right  to  ask  for  a 
previous  payment,  but  the  borrower  may  have  the  right,  if  he 
so  elects,  to  pay  the  note  off  "on  or  before  "  the  maturity 
date  mentioned  in  the  note. 

On  Passage.  Grain,  or  any  commodity,  en  route  upon  the 
ocean  between  any  two  ports. 

On  Sale.     Offered  for  sale. 

On  the  Canal  (on  Canal).  Grain  which  is  at  the  time  in 
transit  on  the  Erie  Canal. 

On  the  Lake  (on  Lake).  Grain,  or  any  commodity,  en 
route  upon  the  Great  Lakes. 

On  the  Track  (on  Track).  Grain,  or  any  commodity,  in 
railroad  cars. 

Open  Account.  The  credit  which  one  banker  enjoys  with 
another  and  against  which  he  draws  in  "  exchange." 

Open  Credit.     See  "  Open  Account." 

Opening  Prices.  The  quotation  of  the  day's  first  sale  of  each 
security. 

Open  Market.  Where  any  or  all  may  buy  and  sell.  A  stock 
exchange  limited  to  the  trading  of  its  members  is  not  an 
"  open  market." 

Open  Mortgage.  A  mortgage  under  which  more  indebted- 
ness can  be  incurred;  the  amount  of  indebtedness  authorized 
under  the  terms  of  the  mortgage  has  not  been  reached.  The 
opposite  of  "  Closed  Mortgage." 

Open  Order.  Meaning  the  same  as  "  Good  Until  Can- 
celled." 

Operating  Companies.  Broadly  speaking,  any  company 
which  is  actually  in  possession  of,  and  operating  its  own  busi- 
ness, but  in  investment  matters  it  has  a  more  restricted  sense. 
It  refers  to  a  company  which  is  owned  or  controlled  by  another, 
but  which  latter,  i.  e.  the  "  controlling  company,"  only 


288  MONEY    AND    INVESTMENTS 

indirectly  conducts  the  management  of  the  former,  which,  by 
its  own  officials,  under  general  instructions  from  the  con- 
trolling company,  actually  manages  its  operation. 

Operating  Expenses.  The  cost  of  every  kind  of  operating 
any  corporation  or  business  industry  for  any  given  period  of 
time.  It  is  sometimes  not  customary  to  include  taxes,  in- 
surance, etc.,  as  an  operating  charge,  but  unless  a  distinct 
separation  is  made  of  these  items,  so  that  the  information 
shall  not  be  kept  from  the  investor,  it  is  proper  that  they 
should  be  included  either  in  "  operating  expenses  "  or  "  fixed 
charges."  Woodlock  says  that  taxes  properly  belong  under 
the  latter. 

The  Interstate  Commerce  Commission  has  prescribed  for 
railroad  companies  the  following  classification  for  "  operating 
expenses:  "  (1)  Maintenance  of  Way  and  Structures,  (2) 
Maintenance  of  Equipment,  (3)  Conducting  Transportation, 
(4)  General  Expenses,  all  of  which  will  be  found  explained 
under  the  several  headings. 

Operating  Surplus.  This  is  the  profit  remaining  after  taking 
into  consideration  all  costs  of  every  nature  of  operating  any 
corporation  or  business  industry  for  a  given  period  of  time. 
Whether  or  no  taxes  and  insurance  should  be  deducted  before 
arriving  at  the  amount  of  the  "  operating  surplus  "  depends 
upon  the  system  of  bookkeeping;  but  unless  they  are  deducted 
a  distinct  separation  should  be  made  so  that  those  interested 
should  not  be  misled.  Interest  on  capital,  indebtedness,  etc., 
should  not  be  deducted  before  determining  the  "  operating 
surplus." 

Operators.  Those  who  trade  very  heavily  in  the  stock  ex- 
change or  who  are  large  buyers  and  sellers  of  securities  on  their 
own  account,  and  whose  actions  more  or  less  influence  the 
trend  of  prices,  are  referred  to  as  "  operators."  One  who 
makes  a  profession  of  speculating  may  be  considered  under 
this  heading. 

0.  P.  Money.     Money  belonging  to  other  people. 

Optional  After  (or  Optional  Bonds).  See  "  Net  Return 
Upon  the  Investment." 

Optional  Bonds  (or  Other  Securities).  Bonds  in  which  the 
right  is  reserved  by  the  issuer  to  pay  off  at  an  earlier  date  than 
the  actual  date  of  maturity.  A  bond  due  in  twenty  years, 
but  subject  to  redemption  after  ten  years,  is  of  this  class,  and 
would  be  termed  a  10/20. 

Option  Day.  The  day  on  which  options,  that  is,  "  puts," 
"  calls,"  etc.,  must  be  declared,  in  accordance  with  London 
Stock  Exchange  rules,  and  which  coincides  with  "  contango 
day."  (See  that  subject.) 


MONEY    AND    INVESTMENTS  289 

Option  Money.  A  payment  to  secure  an  option.  See  next 
subject. 

Options.  By  "  options  "  is  understood  either  a  "  call," 
a  "  put,"  a  "  spread,"  or  a  "  put-and-call."  "  Options,"  in 
reference  to  dealings  in  securities,  mean  the  privilege  of 
buying  or  selling,  or  a  combination  of  buying  and  selling,  a 
certain  amount  of  securities  at  the  expiration  of,  or  within  a 
given  period,  at  prices  determined  at  the  time  of  the  execution 
of  the  contract.  In  order  to  possess  any  of  these  rights,  one 
must  pay  some  other  party  a  sum  of  money  sufficient  to 
induce  him  to  take  the  risk  of  signing  such  a  contract. 

The  price  paid  for  an  "  option  "  is  termed  the  "  premium." 

Orders.  County,  city,  State,  etc.  (See  "  Warrant.")  Any 
written  instructions  to  pay  money,  as  "  checks,"  "  bills  of 
exchange,"  etc. 

An  "  order  "  to  buy  or  sell  is  given  a  broker.  (See  also  the 
following  subjects:  "  Stop  Loss  Orders,"  "  Buying  Order," 
"  Selling  Order,"  "  Postal  Money-Orders  "  and  "  Express 
Money-Orders.") 

Ordinary  Shares  (or  Stock).  The  term  used  in  England  as 
the  equivalent  of  the  American  "  common  stock,"  but 
which  the  English  often  divide  into  two  classes  known  as 
"  preferred  shares  "  and  "  deferred  shares."  (See  those 
subjects.) 

Osceola.     Osceola  Consolidated  Mining  Co.     (Copper.) 

0.  T.     On  track.     (See  "  On  the  Track.") 

Out-Clearer.     This  is  explained  under  "  In-Clearer." 

Outer  Belt.     See  "  Belt  Lines." 

Outlawed.  An  obligation,  which,  on  account  of  the  time 
elapsed  since  it  was  incurred,  or  since  any  payment  of  either 
principal  or  interest  has  been  made  thereon,  cannot  legally  be 
collected,  is  said  to  be  "  outlawed."  That  is  to  say,  the 
statutes  of  limitations  provide  in  each  State  the  length  of  time 
during  which  legal  action  may  be  taken  to  collect  a  claim; 
neglecting  so  to  do  within  the  time  fixed  deprives  one  of  his 
right  to  collect.  A  recent  court  decision  of  interest  to  the 
holders  of  national  bank  stocks  is  given  under  the  last  para- 
graph of  the  subject  "  Double  Liability." 

Out-of-Town  Checks.  A  check  drawn  on  a  bank  situated 
without  the  city  in  which  a  certain  clearing-house  is  located, 
is  an  "  out-of-town  check  "  to  that  clearing-house.  That  is  to 
say,  it  is  a  check  that  cannot  be  collected  through  the  ordinary 
machinery  of  that  clearing-house,-  but  must  be  sent  away  for 
collection. 

Out-of-Town  Clearings.  In  England,  each  country  bank 
has  a  running  account  with  some  London  bank,  and  all  the 


290  MONEY    AND    INVESTMENTS 

city  banks  daily  settle  transactions  with  each  other  through 
the  clearing-house.  Therefore,  the  payment  from  any  part 
of  the  country  to  any  other  part  can  be  accomplished  through 
London.1  By  this,  supposing  the  reader  to  be  familiar  with 
the  subject  "  Clearing-House,"  "  out-of-town  clearings  "  may 
be  understood. 

The  "  out-of-town  clearing  "  system  is  also  explained  under 
"  Foreign  Department  Boston  Clearing-House  Association." 

Out-of-Town  Item.  This  will  be  found  explained  under 
"  City  Item." 

Outside  Bank.  A  bank  not  belonging  to  any  "  clearing- 
house," and  which  does  not  "  clear  "  through  any  other  bank 
which  is.  (See  "  Clearing-House  Agent.") 

Outside  Broker.  One  not  belonging  to  an  exchange,  as,  for 
illustration,  a  "  curb  broker,"  to  which  refer. 

Outside  Market.  This  refers  to  dealings  outside  of  the 
regular  exchange. 

Outsider.  Used  in  contradistinction  to  "  insider,"  to  which 
subject  refer.  The  "  outsider  "  is  the  occasional  speculator 
or  investor;  one  who  does  not  make  a  profession  of  the  same, 
and  also  who  is  not  in  a  position  to  be  in  possession  of  "  inside 
information,"  as  it  is  called,  regarding  the  affairs  of  the  cor- 
poration in  which  he  may  happen  to  be  investing. 

Outside  Stocks  and  Bonds  (Securities).  Those  not  dealt  in 
upon  the  regular  exchanges. 

Outstanding  Issue.  The  total  amount  of  stock,  bonds,  or 
whatever  the  security  may  be,  which  a  company  has  already 
placed  upon  the  market.  A  company,  for  example,  may  be 
legally  authorized  to  issue  $5,000,000  in  first  mortgage  bonds; 
suppose  it  should  have  issued  but  $2,000,000  of  these,  leaving 
$3,000,000  yet  to  be  issued.  $2,000,000  would  be  the  amount 
"  outstanding." 

Over.  This  is  a  term  used  in  Great  Britain,  and  means 
1-32  of  1%  more,  or  above,  a  price.  To  illustrate,  "  over  £," 
would  equal  5-32. 

Overbought  Market.  When  so  many  have  been  buying 
securities  that  the  amount  which  they  have  on  hand  is  so 
great  that  it  is  not  easy  to  sell,  the  demand  for  the  time  being 
having  greatly  lessened,  the  market  is  said  to  have  been 
"  overbought,"  and  it  is  natural  to  expect  a  fall  in 
prices. 

Overcapitalized.  A  company  with  more  securities  out- 
standing than  it  is  able  to  return  interest  or  dividends  upon. 
(See  "Capitalization.")  Meade2  defines  overcapitalization 

1  "  Money  and  the  Mechanism  of  Exchange,"  W.  Stanley  Jevons. 
8  "Trust  Finance,"  E.  S.  Meade. 


MONEY    AND    INVESTMENTS  291 

"  as  that  condition  in  which  the  par  value  of  the  securities 
of  a  company  exceeds  their  actual  value  based  on  profits." 

Over-Certification.  (See  "  Certified  Check,")  Certifying  a 
check  to  an  amount  greater  than  the  deposit  standing  to  the 
credit  of  the  party  drawing  the  check.  This  is  prohibited  by 
law,  but  very  largely  done,  nevertheless. 

Overchecked.     See  "  Overdraw." 

Overdraft.     See  "  Overdraw." 

Overdraw.1  To  "  overdraw "  one's  account.  A  person 
having  money  in  a  bank  "  subject  to  check,  "  that  is,  subject 
to  his  written  order  called  a  "  check,"  may  issue  such  orders 
on  the  bank  to  pay  this  money  out  in  such  sums  and  at  such 
times  as  may  suit  his  convenience.  This  is  called  "  checking 
out,"  and  may  continue  so  long  as  he  does  not  draw  —  issue, 
give  out  —  checks  in  total  amount  greater  than  the  sum 
which  he  has  on  deposit.  But  in  case  he  does  exceed  this 
amount,  then  his  account  is  "  overdrawn;  "  that  is,  he  has 
"  drawn  "  checks  exceeding,  or  "  over,"  his  deposit.  The 
amount  of  such  overdrawn  checks  is  called  an  "  overdraft." 
Theoretically,  a  bank  ought  not  to  pay  any  "  overdraft  " 
checks,  although  in  practice  it  is  often  done,  but  only  when  the 
bank  has  every  confidence  in  its  depositor  making  the  sum 
good,  and  in  supposition  that  his  "  overdraft  "  was  accidental 
and  not  intended;  or  in  case  a  previous  arrangement  had  been 
made  with  the  bank  to  allow  for  such  "  overdraft,"  the  bank 
feeling  secure  in  doing  so.  When  an  "  overdraft  "check  is 
presented  to  a  bank  for  payment,  and  the  bank  does  not  wish 
to  pay  it,  nor  yet  refuse  so  to  do,  the  depositor  drawing  the 
check  is  notified  of  the  "  overdraft,"  if  possible,  and  the  check 
held  without  action  in  the  meantime.  This  is  an  act  of 
courtesy  on  the  part  of  the  bank  and  gives  the  depositor  a 
chance  to  straighten  the  matter  out  without  injury  to  his 
business  reputation. 

"  Overdrafts  "  are  undesirable,  and  should  be  discouraged. 

Overissue.  When  a  corporation  issues  more  of  a  security 
than  it  is  legally  permitted  to,  it  has  made  an  "  overissue." 

Overlying  Mortgage.  A  mortgage  to  which  some  one,  or 
more,  other  mortgages  have  prior  claims;  the  opposite  to 
"  underlie,"  to  which  refer.  (See  "  Junior  Mortgage.") 

Overnight  Loan.  A  loan  of  money  to  be  repaid  the  following 
day. 

1  The  New  York  Courts  have  recently  decided  that  a  bank  is  not  liable 
for  a  clerk's  blunder  for  damages  to  a  depositor.  In  the  particular  case 
upon  which  the  decision  was  rendered,  the  plaintiff  had  a  check  returned, 
indorsed  "not  sufficient  funds."  Owing  to  a  bookkeeper's  mistake  money 
belonging  to  the  plaintiff  had  been  credited  to  another  account.  The 
plaintiff  claimed  that  the  action  of  the  bank  injured  him  in  a  business  way. 
The  jury  brought  in  a  verdict  for  the  defendant. 


292  MONEY    AND    INVESTMENTS 

Oversold.  The  market  is  "  oversold  "  when  more  securities 
have  been  contracted  for  delivery  than  the  sellers  are  able  to 
purchase  at  advantageous  prices,  resulting  in  a  rising  market; 
too  many  people  have  "  gone  short."  (See  "  Selling  Short.") 

Over  the  Counter.  Sales  of  securities  directly  by  bankers 
without  the  medium  of  the  stock  exchanges;  outside  sales, 
as  they  are  called,  of  all  kinds.  Used  particularly  in  speaking 
of  bonds. 

0.  &  A.  October  and  April;  interest  or  dividend  payable 
semi-annually  beginning  with  October. 


P.  The  sign  used  in  the  Spanish  monetary  system  for  the 
"  peseta,"  as  $  is  for  our  dollar. 

Pac.     Pacific. 

p.  a.  c.  These  letters  stand  for  "  put-and-call."  (See 
"  Straddle.") 

Pacific  Coast.  The  Pacific  Coast  Co.  Successor  to  The 
Oregon  Improvement  Co. 

Pacific  Mail.     Pacific  Mail  Steamship  Co. 

Pacific  Railroads.  Used  in  two  senses.  First,  the  railroad 
companies  with  Pacific  as  part  of  their  names;  i.  e.  Union 
Pacific,  Southern  Pacific,  Northern  Pacific,  Canadian  Pacific, 
Western  Pacific,  and  Central  Pacific.  Second,  the  roads 
reaching  across  the  country  to  the  Pacific  Ocean;  i.  e.  the 
first  four  mentioned,  and  the  Northern  Pacific,  the  Great 
Northern,  and  the  Atchison,  Topeka  &  Santa  F6.  The 
Chicago,  Milwaukee  &  St.  Paul  Railway  is  reaching  towards 
the  Pacific  also. 

Pacifies.  Railway  companies  with  "  Pacific  "  as  part  of 
their  names,  and  whose  securities  are  listed  upon  the  New  York 
Stock  Exchange. 

Paid-Up  Stock.  Same  as  "  fully  paid  stock."  (See  "  Fully 
Paid.") 

Paid-Up  Value.  A  life  insurance  term  describing  the  sum  of 
insurance,  which,  without  further  payment  of  premiums, 
should  be  given  the  insured  in  case  of  cessation  on  the  part  of 
the  latter  in  payment  of  premiums  after  a  fixed  time.  In 
other  words,  it  is  the  value  which  a  policy  would  have  after  a 
given  time,  as  set  forth  in  the  policy,  should  the  insured,  from 
inability  or  otherwise,  discontinue  payment  of  premiums 
previous  to  the  time  originally  contemplated  in  the  policy. 
Many  modern  policies  state  therein  the  sums  which  would  be 
the  "  paid-up  value  "  of  the  same  at  different  intervals. 


MONEY    AND    INVESTMENTS  293 

Panama  2's.  United  States  Government  bonds  redeemable 
after  August  1,  1916,  but  due  August  1,  1936,  and  known  as 
the  Panama  Canal  Bonds.  (See  "  Government  Bonds.") 

Pan  Handle.  Pittsburgh,  Cincinnati,  Chicago  &  St.  Louis 
Railway  Company.  Controlled  by  the  Pennsylvania  Railroad 
Company. 

Panic.  A  "  panic  "  in  a  theatre  is  the  result  of  some  fright 
that  induces  many  people  to  lose  their  heads,  and  rush  fran- 
tically to  the  exits  to  escape,  having  no  regard  for  the  weak  and 
helpless  or  the  wiser  counsels  of  the  saner-minded,  who  would, 
perhaps,  accomplish  the  same  escape  from  the  impending 
danger  by  slower  and  more  systematic  methods.  At  such 
times,  much  unnecessary  suffering  results,  caused  by  the  very 
human  desire  of  self-preservation. 

In  a  "  stock  exchange  panic,"  or  "  money  panic,"  or  what- 
ever the  case  may  be,  the  procedure  and  results  in  a  financial 
way  are  about  the  same.  People  sell  who  need  not  have  done 
so;  sales  are  made  which  afterwards  prove  to  have  been 
needless;  unnecessary  losses  result;  the  large  majority  try 
to  do  the  same  thing  at  once.  There  are  so  many  more  sellers 
than  buyers  —  so  many  more  people  than  theatre  exits  —  that 
securities  are  sold  at  any  prices  obtainable.  Failures  result; 
prices  drop  to  an  unnatural  level;  all  confidence  is  lost,  and 
financial  self-preservation  is  the  predominating  factor. 

Panics  are  usually  preceded  by  a  period  of  over-speculation, 
inflation  and  straining  of  credit. 

Paper.     See  "  Business  Paper." 

Paper  Money.  Something  accepted  in  substitute  of  metallic 
money;  money  founded  on  credit;  a  simple  promise  to  pay 
bearer  in  coin  on  demand;  a  non-interest-bearing  note  de- 
pendent for  payment  upon  the  ability  of  the  issuer  to  meet  the 
same.  Treasury  Notes  of  1890,  gold1  and  silver  certificates, 
United  States  Notes,  etc.,  issued  in  this  country,  are  examples. 
The  annual  cost  of  maintenance  of  the  paper  currency  issued 
by  the  Government  averages  about  two-tenths  of  one  per  cent, 
of  the  amount  outstanding. 2 

Paper  currency  of  all  denominations  and  kinds  outstanding 
in  the  United  States  October  31,  1906,  as  furnished  by  the 
Treasury  Department,  was  $347,681,016,  less  $1,000,000 
unknown,  destroyed. 

The  first  paper  money  issued  by  the  United  States  Govern- 
ment was  authorized  by  Acts  passed  in  1861,  but  this  kind  of 

1  Conant  declares  that  these  certificates  "  are  not  paper  money  in  the 
usual  sense  because  they  represent  gold  coin  of  full  value,  instead  of  prom- 
ises to  pay  which  there  may  not  be  the  ability  to  fulfil."  And  he  is  right, 
for,  as  Fiske  says,  "  paper  money  is  not  real  money  and  will  not  continue 
current  when  the  credit  on  which  it  was  based  is  gone." 

1  Report  of  the  Secretary  of  the  Treasury  for  1905. 


294  MONEY    AND    INVESTMENTS 

money  was  first  issued  in  America  when  attempted  by  the 
Colonies  (Massachusetts  first)  as  early  as  1690.  Paper  money 
is  said  to  have  been  first  issued  in  China  about  1,000  years 
before  Christ.1  (See  "  Convertible  Paper  Money "  and 
"  Inconvertible  Money.") 

Paper  Profits.  Profits  supposed  to  exist,  but  not  yet 
realized.  A  purchaser  of  a  certain  stock  at  $90  per  share  may 
estimate  that  he  has  made  a  profit  of  $10  per  share  upon  its 
advancing  to  $100,  but  he  cannot  be  certain  of  the  fact  until 
the  stock  has  been  sold.  He  has  only  a  "  paper,"  or  supposed 
profit,  until  such  time. 

Par.  State  of  equality;  equal  value;  equivalence  without 
discount  or  premium. 

The  usual  meaning  of  "  par  "  is  100;  that  is,  a  share  of 
stock,  for  example,  which  bears  on  its  face  the  statement  that 
it  represents  a  value  of  $100.  In  practice  "  par  "  is  used  in  a 
broader  sense,  for  the  "  par  value  "  differs  in  various  securi- 
ties. Bonds  are  in  denominations,  varying  from  fifty  cents 
(as  were  once  issued  by  a  Western  City)  to  very  large 
amounts.  Pennsylvania  Railroad  stock  represents  shares  of 
$50  each;  the  Grand  Trunk  Railway  Co.  of  Canada,  £100 
($486.66);  many  manufacturing  stocks  are  for  $1,000  a 
share;  some  bank  shares  likewise;  many  mining  stocks  repre- 
sent shares  of  ten  cents,  twenty-five  cents,  one  dollar,  etc. 
So  "  par,"  as  used  in  the  financial  world,  really  means  the 
actual  face  value  of  any  security,  without  regard  to  its  de- 
nomination. This  is  often  confusing  to  an  investor,  from  the 
fact  that  a  stock  may  be  quoted  at  "  ninety,"  which  has  a 
"  par  value  "  of  fifty,  and  which  is,  therefore,  quoted  at  forty 
dollars  premium,  whereas  the  investor,  not  knowing  its  "  par 
value,"  may  think  it  below  "  par;  "  really,  the  stock  is  quoted 
at  80%  above  "  par,"  for  if  its  parity  were  changed  to  100 
(or  two  shares  made  into  one)  its  quotation  of  90  would  equal 
180.  This  often  misleads  the  unposted  into  buying  a  stock 
("  because  it  is  cheap  ")  thinking  it  is  selling  at  a  discount, 
when  it  really  is  at  a  high  premium.  A  certain  one  of  our 
copper  stocks  some  years  ago,  with  a  "  par  value  "  of  $25  was 
selling  at  $150,  and  looked  much  cheaper  to  investors  (or 
speculators)  at  that  price  than  at  600,  which,  in  percentage, 
was  its  real  selling  price.  Many  a  purchaser  of  that  stock 
would  have  hesitated  if  he  had  realized  that  it  had  already 
advanced  five  hundred  per  cent,  in  the  market  and  was 
selling  at  six  times  its  original  capitalization.  A  capital  of 
$5,000,000  becomes  quoted  at  $30,000,000  in  this  way.  Mining 
stocks  are  often  issued  in  shares  of  low  denominations  to  per- 
mit of  just  this  deceiving  of  the  unwary. 

In  buying  a  security,  ascertain  the  actual  par  value  in  dollars 

1 "  The  Work  of  Wall  Street,"  by  S.  S.  Pratt. 


MONEY    AND    INVESTMENTS  295 

and  cents  and  then  calculate  its  selling  price  on  the  basis  of  a  par 
value  of  $100.  This  will  show  the  ratio  between  the  original 
capitalization  of  the  security  and  the  quoted  market  value 
of  the  entire  issue  of  such  security. 

Another  important  matter  to  remember  is  the  difference 
between  the  rules  of  the  different  stock  exchanges  in  relation 
to  "  par."  The  following  will  give  an  idea  as  to  this: 

On  the  New  York  Stock  Exchange,  Pennsylvania  stock  of  a 
par  value  of  50  is  quoted  on  the  basis  of  its  having  a  par  value 
of  $100;  that  is,  two  shares  are  quoted  for  one,  and  all  trans- 
actions upon  that  Exchange,  in  such  cases,  are  made  on  the 
basis  of  par  value  of  the  stock  either  being  100  or  a  sufficient 
number  of  shares  put  together  to  equal  100.  Upon  the  Boston 
Stock  Exchange  no  such  rule  exists  and  quotations  are  based 
upon  the  par  value  without  any  regard  to  whether  it  is  $100, 
more,  or  less. 

Parent  Company.  A  corporation  controlling  or  owning  other 
companies.  The  United  States  Steel  Corporation  is  a  "  parent 
company."  The  Carnegie  Company,  the  Federal  Steel  Com- 
pany, etc.,  integral  parts  of  the  larger  corporation,  are  "  sub- 
sidiary companies." 

Paris  Bourse.  The  Paris  Stock  Exchange.  The  full  title  is 
"  The  Company  of  the  Paris  Bank,  Exchange,  Trade,  and 
Finance  Brokers." 

Paris  Money.  Rates  asked  for  "  call  "  and  "  time  "  money 
at  that  point. 

Paris  Private  Discounts.  The  rate  at  which  firms  or  in- 
dividuals of  known  good  financial  standing  can  borrow  in 
Paris,  i.  e.  the  rate  at  which  their  paper  will  be  discounted. 

Parity.  Equal  to;  a  similarity  existing.  The  equivalent  in 
price  of  the  same  security  quoted  in  different  markets  after 
making  allowance  for  different  methods  of  quoting  or  other 
factors. 

Parity  of  Silver.  On  the  present  standard  U.  S.  ratio  of 
gold  to  silver  (1  to  15.988)  pure  silver  must  be  commercially 
worth  $1 .2929  per  fine  ounce  to  be  at  a  par  with  gold.  $1 .2929 
is,  therefore,  called  the  "  parity." 

Par  of  Exchange.  The  relative  value  of  the  money  in  one 
country  to  that  of  another,  taking  gold  bullion  of  an  agreed 
"  fineness  "  as  a  basis  upon  which  to  figure.  As  between  this 
country  and  Great  Britain,  $4.866-|-  is  taken  as  the  "  par  of 
exchange,"  by  which  is  understood  that  the  English  "  pound 
sterling  "  is  the  equivalent  of  $4.866-f-  in  United  States  gold 
coin.  In  other  words,  that  the  bullion  value  of  our  gold  dollar 
and  the  English  gold  "  pound  "  is  as  $1.  to  $4.866-j-. 

Par  of  Sterling  Exchange.  The  equivalent  of  the  pound 
sterling  (£1)  in  United  States  money  is  $4.866+  ($4.867). 


296  MONEY    AND    INVESTMENTS 

Parrot.     Parrot  Silver  &  Copper  Co. 

Participating  Bond.  One  which,  while  secured  by  a  mort- 
gage on  a  specific  property,  provides  that  the  holder  shall 
share  in  the  profits  accruing  to  the  issuing  corporation  through 
ownership  of  the  shares  in  other  corporations,  and  which  may 
or  may  not  be  additionally  secured  by  the  deposit  of  such 
securities.  A  good  illustration  is  that  of  the  Oregon  Short 
Line  4%  Participating  Gold  Bonds,  which  were  issued  in  1902. 
These  were  a  direct  obligation  of  the  Oregon  Short  Line 
Railroad  Company,  but  were  additionally  secured  by  the 
deposit  of  the  stock  of  the  Northern  Securities  Co.,  par  for 
par,  to  the  amount  of  the  bonds  issued.  The  bonds  themselves 
were  to  receive  4%  per  annum  from  August  1,  1902,  until 
February  1,  1904,  on  which  date,  and  on  the  first  day  of 
February  of  each  subsequent  year,  they  were  to  receive,  in 
addition  to  the  regular  payment  of  4%  per  annum,  a  pro 
rata  share  of  any  amount  received  by  the  company  the 
previous  year  as  dividends  exceeding  4%  on  the  bonds  out- 
standing on  the  collateral  deposited  with  the  trustee  as 
security  against  these  bonds.  This  issue  has  been  called  for 
payment. 

Participating  Policy.  A  participating  life  insurance  policy 
is  one  under  which  the  holder  shares  in  any  surplus  earnings 
of  the  company,  receiving  them  in  the  form  of  cash  dividends, 
or  in  additional  insurance,  at  the  option  of  the  insured. 

Parti-Mortgage  Receipt.  A  certificate  issued  by  a  company 
holding  the  papers  in  a  mortgage  showing  the  holders'  pro- 
portionate ownership  in  the  loan  which  the  mortgage  secures. 
This  is  done  when  a  mortgage-note  is  of  such  large  amount 
that  to  find  one  purchaser  for  the  whole  would  be  difficult  or 
impossible. 

Parting.  The  separation  from  bullion  of  any  silver  which  it 
may  contain,  so  that  the  gold  and  silver  may  be  obtained  in 
the  form  of  separate  bars. 

Partnership.     See  "  Firm." 

Partnership  Agreement.     See  "  Firm." 

Part-Paid  Stock.  Stock  which  the  owners,  as  shown  upon 
the  stock  books  of  the  company,  are  liable  for  further  pay- 
ments; or  stock  upon  which  the  subscribers  have  not  paid 
their  subscriptions  in  full. 

Par  Value.     See  "  Par." 

Pass  a  Dividend.  A  dividend  is  passed  when  it  is  not  paid  at 
the  regular  expected  time;  when  a  corporation  ceases  paying* 
dividends,  without  a  formal  vote  so  to  do. 

Pass-Book.     See  "  Bank-book." 

Passenger  Density.    The  total  number  of  passengers  which  a 


MONEY    AND    INVESTMENTS  297 

railroad  carries  one  mile  divided  by  the  number  of  miles  of 
line  operated.  (See  "  Freight  Density.")  The  Interstate 
Commerce  Commission  concisely  expresses  the  "  passenger 
density  "  as  the  "  passengers  carried  one  mile  per  mile  of  line." 

Passenger-Mile.  The  movement  of  one  passenger  one  mile. 
It  is  taken  as  the  unit  of  cost  and  service  in  passenger  trans- 
portation. (See  "  Ton-Mile.) 

Passenger-Mile  Cost.  This  is  the  cost  of  carrying  one  pa- 
senger  one  mile.  (See  "  Ton-Mile  Cost.") 

Paul.    Chicago,  Milwaukee  &  St.  Paul  Ry.  Co. 

Pawn.  In  Great  Britain  the  word  is  used  as  the  equivalent 
of  our  depositing  collateral  as  security  for  a  loan:  they 
"  pawn  "  the  security;  we  "  pledge  "  it.  We  apply  the  word 
"  pawn  "  only  in  the  sense  of  a  transaction  with  a  "  pawn- 
broker." 

Payable  in  Exchange.  If  a  draft  or  other  instrument  is  made 
"  payable  in  exchange  "  it  means  that  it  calls  for  payment  in 
funds  of  the  place  where  issued;  that  is  to  say,  if  a  man  in 
New  Orleans  draws  a  draft  on  New  York  "  payable  in  ex- 
change "  it  means  that  the  one  against  whom  it  was  drawn 
in  New  York  must  pay  it  with  a  check  (exchange)  on  New 
Orleans,  in  other  words  in  New  Orleans  "  funds."  (See 
"  Cashier's  Check.") 

Payable  in  Gold.  Bonds,  notes,  etc.,  in  which  the  borrower 
agrees  to  pay  the  principal  or  interest,  or  both,  as  the  case  may 
be,  in  gold.  In  this  country,  the  wording  of  such  a  promise 
usually  reads  "  payable  in  gold  coin  of  the  United  States  of 
the  present  standard  of  weight  and  fineness."  Such  wording 
is  desirable,  as  it  provides  that  the  borrower  shall  pay  in 
coined  gold  of  the  United  States,  fulfilling  the  requirements  of 
the  standard  coining  laws  as  at  present  enacted,  eliminating 
the  danger  arising  from  any  future  laws  passed  of  lesser  con- 
servative nature  during  the  life  of  the  investment.  (See 
"  Standard  of  Weight  and  Fineness.") 

Payable  in  Lawful  Money.  Bonds,  notes,  or  other  evidences 
of  indebtedness,  in  which  the  borrower  agrees  to  pay  principal, 
or  interest,  or  both,  as  the  case  may  be,  in  "  lawful  money  " 
of  the  United  States;  money  which  the  Government  declares 
to  be  "  legal  tender  "  (to  which  subject  refer). 

Payable  Only  through  the  Clearing-House.  After  the 
reader  has  familiarized  himself  with  "  Clearing-House  Loan 
Certificates,"  and  the  reasons  for  their  issuance,  it  will  be 
understood  that  the  banks  in  times  of  financial  distress  have 
need  to  hold  on  to  some  actual  cash.  As  a  result,  in  such 
instances,  checks  are  sometimes  accepted  in  lieu  of  cash,  such 
checks  being  stamped:  "  Payable  only  through  the  Clearing- 
House,"  "  Through  the  Clearing-House,"  or  with  words 


298  MONEY    AND    INVESTMENTS 

having  similar  import.  Banks  being  legally  required  to  pay 
checks  on  demand  in  money  which  is  "  legal  tender,"  it  is  but 
a  matter  of  accommodation  for  a  person  to  accept  a  check 
stamped  as  above,  but  by  so  doing  he  satisfies  the  law  as 
regards  "  legal  tender  "  payments;  although,  by  insisting,  he 
could  compel  the  bank  to  pay  him  the  cash,  and  for  such 
emergencies  some  money  must  be  actually  retained  in  the 
vaults  of  the  institution. 

If  the  reader  will  understand  by  referring  to  "  Clearing- 
House,"  the  methods  by  which  the  differences  between  banks 
are  there  adjusted,  it  will  be  seen  that  by  pursuing  the  method 
of  not  paying  the  check  at  the  time  of  presentation,  but  by 
postponing  its  payment  until  the  "  clearing-house  "  hour  of 
the  following  business  day,  that  the  money  necessary  to  effect 
its  settlement  at  least  once  would  not  be  called  for,  and  that 
possibly  no  money  at  all  would  be  needed.  The  differences 
between  the  banks  ultimately  adjust  themselves  through  the 
machinery  of  the  clearing-house. 

Payable  to  Bearer.  A  negotiable  instrument,  such  as  a 
check,  may  be  drawn  so  as  to  be  good  in  the  hands  of  the 
bearer  without  regard  to  the  person  so  long  as  the  bearer  is  a 
bona  fide  holder.  Such  checks  may  be  passed  from  hand  to 
hand  without  indorsement.  (For  further  information  on  this 
subject  refer  to  "  Check;  "  also  see  next  subject.) 

Payable  to  Order.  A  negotiable  instrument  such  as  a  check 
is  drawn  payable  to  some  person  or  to  the  order  of  such  person; 
that  is,  for  example:  "  Pay  to  the  order  of  Thomas  West,'' 
or  "  Pay  to  Thomas  West  or  order."  Such  an  instrument 
must  be  "  indorsed  "  (see  "  Indorse  ")  to  be  good  in  the 
hands  of  other  than  Thomas  West.  (For  further  information 
see  "  Check.") 

In  order  that  an  instrument  may  be  negotiable  it  must  be 
made  "  to  order  "  or  "  to  bearer;  "  that  is,  if  drawn  payable 
simply  to  Henry  Adams,  he  has  no  right  to  transfer  it,  and  it 
is  payable  to  him  only.  Other  words  of  similar  import  may  be 
used,  but  they  must  be  the  equivalent  of  "  to  order,"  or  "  to 
bearer  "  to  convey  the  power  of  negotiability. 

Payable  with  Exchange.  When  a  draft  has  appended  the 
words  "  with  exchange  "  or  "  payable  with  exchange  "  the 
person  paying  the  same  is  understood  to  pay  the  cost  of  the 
collection  as  well  as  the  amount  of  the  face  of  the  draft. 

Pay-Day.  The  last  of  the  "  Fortnightly  Settling-Days  "  of 
the  London  Stock  Exchange.  (See  the  subject  in  quotations.) 
Also  called  "  Account-Day  "  and  "  Settlement-Day."  This 
is  the  settling-day  proper;  when  the  accounts  are  settled 
between  the  brokers  and  bankers  for  securities  purchased, 
and  delivery  is  made  of  the  same;  or,  providing  delivery  is 


MONEY    AND    INVESTMENTS  299 

not  made,  but  the  securities  are  carried  over  to  the  next 
"  settlement,"  the  differences  required  to  balance  accounts 
are  adjusted.  In  short,  transactions  are  brought  either  to  a 
final  adjustment  or  so  settled  as  to  carry  them  forward  to  the 
next  fortnightly  account. 

Payee.  The  person  (firm  or  corporation)  to  whom  a  note, 
draft,  etc.,  is  made  payable.  In  the  case  of  a  note,  the 
"  payee  "  is  the  one  to  whom  the  promise  to  pay  is  made. 
(See  "  Draft.") 

Payer.  The  person  (firm  or  corporation)  who  pays  a  draft, 
note,  or  similar  paper. 

Paying  Teller.  See  "  Teller."  Also  called  the  "  First 
Teller." 

Payment  Bill.     Same  as  a  "  Bill  for  Payment." 

Payment  Stopped.     See  "  Stop  Payment." 

Pegged.  A  security  is  "  pegged  "  when  one  or  more  persons 
so  control  the  buying  or  selling  that  they  are  able  to  prevent 
the  prices  rising  or  falling  below  a  certain  fixed  point.  The 
ABC  of  Wall  Street  says:  "  A  stationary  market,  neither 
declining  nor  advancing,  and  held  by  buying  or  selling  orders, 
is  said  to  be  pegged." 

Pence.     The  plural  of  "  penny." 

Pennsylvania  Interests.  Certain  corporations  directly  or 
indirectly  in  the  control  —  or  partial  control  —  of  the  Pennsyl- 
vania R.  R.  Co.,  or  its  subsidiary  companies,  some  of  which 
are  the  Baltimore  &  Ohio,  the  Long  Island,  the  Norfolk  & 
Western,  the  Pittsburg,  Cincinnati,  Chicago,  &  St.  Louis,  and 
the  Cleveland  &  Pittsburg  R.  R.  Companies.  The  Pennsyl- 
vania R.  R.  Co.  has  already  sold  a  portion  of  its  Baltimore  & 
Ohio  and  Norfolk  &  Western  holdings,  and  it  is  thus  showing 
a  policy  of  severing  its  interest  in  other  or  competing 
lines. 

Penny.  A  coin  of  Great  Britain  equal  to  l-12th  of  an  Eng- 
lish shilling,  or  about  two  cents  United  States  money.  We 
also  call  our  own  one  cent  piece  by  the  same  name. 

Per.  The  Latin  for  by,  as  "  per  annum,"  meaning  "  by  the 
year,"  etc. 

Per  Capita  Circulation.     See  "  Money  Circulation." 

Per  Capita  Debt.  On  June  30,  1906,  the  per  capita  debt  of 
the  United  States  was  $11.41. 

Per  Cent.  (Per  Centum).  Meaning,  literally,  by  the  hundred, 
but  used,  in  practice,  as  the  equivalent  of  "  hundredth."  6% 
means  six  one-hundredths  or  $6.00  on  the  $100. 

Per  Cent.  Grade.     See  "  Grade." 

Per  Pro  (or  Per  Procuration).     A  signature  by  an  agent 


300  MONEY    AND    INVESTMENTS 

having  limited  authority  usually  contained  in  a  power  of 
attorney.  A  letter  signed, 

Per  pro  White  &  Co., 

Charles  Blacl^ 
or 

James  White  &  Co., 

per  pro  Charles  Black, 

is  an  example.  The  latter  is  the  more  correct  method  of 
signing,  although  the  former  is  in  more  common  use  among 
merchants.  This  phrase  is  sometimes  still  further  abbreviated 
as  "  p.  p." 

A  signature  of  this  kind  is  considered  of  itself  an  announce- 
ment of  limited  authority,  a  statement  of  the  limitations  of 
which  will  be  furnished  on  request.  Persons  accepting  in- 
struments signed  in  this  manner  without  investigating  the 
authority  of  the  agent  signing  them  do  so  at  the  risk  of  after- 
wards discovering  that  the  agent  has  exceeded  his  authority.1 

Personal  Check.  A  check  drawn  by  a  depositor,  as  distin- 
guished from  a  check  drawn  by  a  bank.  Sometimes  used  to 
indicate  a  check  drawn  against  a  "  country  bank." 

Personal  Property.  All  movable  property;  horses,  tools, 
furniture,  "  chattels  "  of  all  kinds  (crops  of  annual  planting, 
such  as  potatoes,  are  usually  treated  as  "  personal  property," 
but  would  pass  with  the  sale  of  the  land  if  growing  thereon), 
securities,  etc.,  as  distinguished  from  "  real  property,"  to 
which  refer. 

Personal  Security.  Any  property  such  as  described  under 
"  personal  property  "  when  given  to  secure  the  payment  of  a 
debt,  or  the  fulfilment  of  a  promise. 

Peseta.  The  monetary  unit  of  Spain,  and  equivalent  to  the 
French  "  franc,"  or  $.193  United  States  money. 

Peso.  The  gold  "  peso  "  is  the  unit  of  value  of  the  Philippine 
Islands,  and  contains  12  9-10  grains  of  gold,  9-10  fine.  Silver 
"  pesos,"  of  the  weight  of  416  grains  and  of  the  standard,  by 
weight,  of  900  parts  pure  metal  and  100  parts  copper  alloy,2 
have  been  coined  for  current  use,  exchangeable  on  the  basis 
of  the  "  gold  exchange  standard  "  —  to  which  subject  refer  — 

1  "  A  signature  by  procuration  operates  as  notice  that  the  agent  has  but 
a  limited  authority  to  sign  and  the  principal  is  bound  only  in  case  the  agent 
in  so  signing  acted  within  the  actual  limits  of  his  authority."  —  Revised 
Laws  of  Massachusetts,  Chapter  73,  Section  38. 

2  In  December,  1906,  owing  to  the  rise  in  the  market  price  of  silver,  the 
silver  peso  was  changed  so  as  to  contain  800  parts  of  pure  metal  and  200 
parts  of  copper  alloy,  and  of  the  weight  of  308.64  grains.    This  was  neces- 
sitated from  the  fact  that  the  pure  metal  under  the  previous  standard  was 
worth  more  in  the  market  than  the  face  value  of  the  coin,  making  it  an 
object,  therefore,  to  melt  up  the  coins  and  sell  the  silver  as  bullion. 


MONEY    AND    INVESTMENTS  301 

at  the  rate  of  two  silver  "  pesos  "  for  one  United  States  gold 
dollar.  They  are  legal  tender  for  all  debts,  public  and  private, 
unless  otherwise  specifically  provided  in  the  contract  (except 
such  as  were  contracted  prior  to  December  31,  1903)  in  the 
Philippine  Islands.  Subsidiary  silver  coins  are  legal  tender 
there  to  the  amount  of  $10.  (See  "  Centavos.") 

"  Peso  "  is  also  the  monetary  unit  of  the  Argentine  Repub- 
lic, being  equivalent  to  $.965  United  States  money.  Also 
Guatemala,  Honduras,  Nicaragua,  and  Salvador,  being  in 
each  case  equivalent  to  $.478  United  States  money.1  Of 
Chile,  being  equal  to  $.365,  and  of  Uruguay,  being  equal  to 
$1.034  United  States  money. 

The  Mexican  dollar  is  also  called  a  "  peso." 

Petty  Cash  Book.  In  bookkeeping,  a  book  in  which  small 
items  of  cash  expenditures,  postage  stamps,  telegrams,  and 
the  like,  for  example,  are  entered,  to  be  later  summed  up  and 
entered  in  another  book  as  one  item. 

Pf.  (or  Pfd.).     Preferred. 

Pfennig.  One  one-hundredth  of  the  German  "  mark," 
which  is  their  monetary  unit.  The  pfennig  is  equivalent  to 
nearly  one-fourth  of  a  United  States  cent. 

Philippine  Bonds.  The  bond  issues  of  the  Philippine  Islands 
have  been  by  authority  of  Congress.  The  United  States,  how- 
ever, is  not  legally  responsible  for  their  payment,  they  being 
obligations  of  the  Philippine  Islands  only.  By  an  Act  of  Con- 
gress these  bonds  are  exempt  from  taxation  throughout  the 
United  States. 

Phcenix.     Phcenix  Consolidated  Copper  Co. 

Piaster.  The  unit  of  the  Turkish  monetary  system,  and 
equivalent  to  $.044  United  States  money.  The  Egyptian 
"  piaster "  is  one-hundredth  part  of  their  pound,  and  is 
equal  to  $.04943  United  States  money. 

Pie.     See  India  Money  Table  under  "  Rupee." 

Pig  Iron.  This  is  the  iron  as  it  is  extracted  from  the  ore. 
As  it  comes  from  the  blast-furnaces  it  is  run  into  moulds  in 
sand,  which  produces  small  masses  of  convenient  size  for 
commercial  use. 

Piker.    One  who  trades  in  very  small  lots  of  securities. 

Pinch.  "  Money  pinch;  "  a  sudden  rise  in  money  rates; 
difficult  to  borrow,  and  then  only  at  high  rates.  A  "  pinch  " 
rather  implies  a  short  duration  of  such  conditions,  however, 
and  not  very  serious. 

1  These  last  four  countries  are  on  a  silver  basis.  Therefore,  the  value 
as  given  here,  which  is  taken  from  the  Circular  issued  by  the  Director  of 
the  Mint,  April  1,  1906,  is  subject  to  fluctuation  with  the  market  price 
of  silver. 


302  MONEY    AND    INVESTMENTS 

Pinched  Out.  A  vein  of  gold,  for  illustration,  is  "  pinched 
out  "  when  it  narrows  up  to  a  non-paying  degree  or  disappears 
entirely. 

Pine  Tree  Money.  During  the  last  half  of  the  17th  century 
silver  coins  of  the  denomination  of  a  shilling  and  under  were 
coined  in  Massachusetts,  having  upon  their  face  a  device  of  a 
pine  tree.  At  first  the  larger  denominations  were  referred  to 
as  the  "  Boston  Shilling  "  or  the  "  Bay  Shilling,"  and  later 
were  known  as  the  "  Pine  Tree  Shilling." 

Pine  Tree  Shilling.    See  "  Pine  Tree  Money." 

Pinholed.  Certificate  of  stock  having  had  a  memorandum 
(or  many  of  them)  pinned  to  it.  The  more  holes  the  greater 
the  number  of  times  it  has  probably  passed  from  hand  to  hand. 

Pipe-Lines.  A  system  of  piping,  mostly  underground, 
through  which  oil  is  pumped  in  order  to  transfer  it  from  the 
producing  region  to  the  storage-tanks  at  either  a  distributing 
market  or  a  refinery.  Some  of  the  "  pipe-line  "  systems  cover 
hundreds  of  miles  of  territory,  and  permit  the  transportation 
of  oil  at  a  low  cost.  The  "  Rate  Bill,"  which  has  recently 
passed  Congress,  includes  such  "  pipe-lines  "  as  these  under 
the  heading  of  "  Common  Carrier." 

Pit.  In  the  Chicago  Board  of  Trade  there  are  four  portions 
of  the  building,  which  are  set  aside  exclusively  for  dealing  in: 
First,  grain;  second,  wheat;  third,  oats;  fourth,  provisions. 
These  are  called  the  "  Pits."  Each  one  is  in  charge  of  an 
official  of  the  Board  of  Trade,  who  notes  the  changes  of 
prices  as  they  occur,  and  who  also  notes  all  transactions  which 
are  settled  on  the  basis  of  the  official  price  at  the  hour  in  which 
they  occur.  The  "  Pit  "  is  equivalent  to  the  "  Post  "  in  the 
New  York  Stock  Exchange. 

Pit  Traders.  These  are  to  the  Chicago  Board  of  Trade  what 
the  "  room  traders  "  are  to  the  stock  exchanges;  i.  e.  brokers 
who  trade  in  grain,  provisions,  etc.,  for  their  own  accounts, 
and  who  do  so  upon  the  "  Board  of  Trade." 

Place.  To  place  an  issue  of  bonds  is  to  find  a  market  for  it; 
to  sell  it. 

Plain  Bond.  A  bond  not  secured  by  mortgage;  practically 
the  same  thing  as  a  "  debenture  bond  "  or  a  "  certificate  of 
indebtedness."  It  would  not  be  supposed  to  have  a  "  sinking 
fund." 

Plant.  All  the  fixed  part  of  a  concern  (manufacturing, 
transportation,  etc.)  except  its  land;  the  buildings,  machinery, 
etc. 

Plugged.  A  Chicago  Board  of  Trade  term  indicating  a 
certain  attempt  at  deception  in  the  sale  of  grain. 

Plum.     "  The   stockholders   received   a   plum."     This   is 


MONEY    AND    INVESTMENTS  303 

about  the  same  idea  as  "  cutting  a  melon;  "  an  extra,  un- 
expected, or  unusually  large  profit. 

Plunge.     To  speculate  in  a  reckless  manner. 

Plunger.  A  reckless  speculator;  one  who  takes  big  risks 
for  big  gain. 

P.  Mail.     Pacific  Mail  Steamship  Co. 

Point.  One  per  cent.  A  security  rises  three  points  when  it 
advances  three  per  cent,  in  price. 

In  coffee  trading,  fluctuations  are  recorded  on  the  basis  of 
1-20%  per  pound,  equalling  one  "  point."  In  the  same  way, 
in  cotton  a  cent  is  divided  into  100  "  points  "  and  a  decline 
of  £  of  a  cent  per  pound  is  equivalent  to  25  "  points  "  or  $1.25 
on  each  bale. 

Pointer.  In  financial  slang,  this  means  the  same  as  a  "  tip." 
(See  that  subject.) 

Pool.  A  number  of  persons  uniting  or  joining  their  interests 
for  the  purpose  of  buying  or  selling  and  increasing  or  depress- 
ing the  price  of  one  or  more  securities,  and  who  agrees  to 
divide  the  loss  or  profit.  It  is  probable  that  "  pools  "  have  a 
greater  direct  influence  upon  the  stock  market  in  general  than 
any  other  single  factor.  A  "  clique "  is  much  the  same 
thing.1  (See  "  Clique.") 

Also,  an  agreement  among  competitors  fixing  a  monopolistic 
price,  with  a  division  of  the  territory,  insuring  practically 
complete  monopoly  in  certain  sections  for  each  party  to  the 
agreement;  an  agreement  among  competitors  so  as  to  limit 
production,  prevent  competition  by  the  control  of  both  mar- 
kets —  that  of  the  raw  as  well  as  the  finished  product  —  an 
agreed  selling  price  for  the  output,  and  a  division  of  the 
selling  territory,  while  outwardly  keeping  up  the  appearance 
of  active  rivals.  In  a  few  words,  a  means  to  prevent  competi- 
tion, and  a  division  of  the  business  for  mutual  profit. 

Another  form  of  "  pool  "  is  an  agreement  between  two  or 
more  railways  as  to  a  division  of  earnings,  so  that  they  can 
resist  the  temptations  of  the  big  shippers,  and  be  insured  a 
fair  share  of  the  transportation  business  at  stable  rates,  which 
will  apply  without  partiality  to  all  patrons.2 

P.  0.  R.    Express  or  freight  payable  to  the  transportation 

1 A  recent  decision  in  the  suit  of  Franklin,  Scott  &  Co.,  stock  brokers, 
against  certain  others,  participants  in  a  "  pool,"  obligates  any  member 
of  a  "  pool  "  for  the  full  liability  of  whatever  the  "  pool's  "  losses  may  be, 
irrespective  of  whatever  his  interest  in  the  "  pool  "  may  be. 

2  Johnson  in  his  "  American  Railway  Transportation  "  says,  "  The 
pools  were  agreements  among  railroads  whereby  their  competitive 
traffic  or  the  receipts  from  that  traffic  were  divided  among  the  companies 
according  to  stipulated  ratios.  Arrangements  for  the  division  of  the  busi- 
ness were  called  traffic  pools,  those  for  the  distribution  of  the  receipts 
money  pools." 


304  MONEY    AND    INVESTMENTS 

company  on  receipt  of  the  goods  by  them.  The  opposite  to 
"  collect." 

Pork.  The  trading  unit  for  pork  is  250  barrels.  The  rate  of 
commission  charged  on  the  Chicago  Board  of  Trade  for  the 
purchase  or  sale,  or  for  the  purchase  and  sale  of  mess  pork, 
in  lots  of  250  barrels,  or  multiples  thereof,  is  5  cents  per  barrel. 

The  usual  "  margin  "  required  is  $1  per  barrel. 

Port  of  . Bonds.  Two  notable  examples  are  issues 

by  the  Port  of  Portland,  Oregon,  and  the  Port  of  New  Orleans, 
La.  A  description  of  the  former  will  suffice.  It  embraces  the 
city  and  much  adjacent  territory;  has  its  own  officials,  and 
creates  its  own  indebtedness,  for  which  payment  all  the 
taxable  property  in  this  distinct  municipality  is  held.  The 
object  for  which  it  was  created  was  for  the  purpose  of  ob- 
taining suitable  ways  for  navigation  at  Portland,  and  between 
that  city  and  the  sea. 

Post.  In  most  stock  exchanges  there  are  set  aside  certain 
places  (posts  set  on  the  floor)  where  some  of  the  most  active 
and  important  securities  dealt  in  upon  the  exchange  are  bought 
and  sold.  Such  designated  spots  are  known  as  the  "  Sugar 
Post,"  for  example,  where  transactions  in  the  shares  of  the 
American  Sugar  Refining  Co.  are  carried  on.  These  corre- 
spond to  the  "  Wheat  Pit,"  "  Oats  Pit,"  "  Provision  Pit,"  etc., 
of  the  Chicago  Board  of  Trade. 

In  bookkeeping  to  "  post  "  is  to  make  entries  in  the  ledger 
from  accounts  previously  entered  in  other  books,  such  as  the 
journal  or  cash  book.  When  an  account  has  been  "  posted  " 
in  the  ledger,  it  will  show  a  true  state  of  its  condition. 

Postal.    Postal  Telegraph-Cable  Co. 

Postal  Money-Orders.  The  following  is  from  the  printed 
regulations  as  issued  by  the  United  States  Post-Office  De- 
partment: 

Application.  The  process  of  obtaining  a  money-order 
is  to  fill  in  a  simple  form,  called  an  "  application,"  which  form 
is  furnished  free  of  charge,  and  to  present  such  application 
at  the  money-order  branch  of  the  post-office,  where,  upon 
payment  of  the  sum  to  be  sent  and  of  the  small  fee  exacted, 
a  money-order  will  be  drawn  for  any  desired  amount  (but  no 
single  order  for  more  than  $100),  payable  at  any  money-order 
office  in  the  United  States  designated  by  the  applicant.  When 
a  larger  sum  than  $100  is  to  be  sent  additional  orders  may  be 
obtained. 

At  all  of  the  larger  post-offices,  those  of  the  first,  second,  and 
third  classes,  and  at  many  of  the  smaller  ones,  International 
money-orders  may  also  be  obtained,  payable  in  almost  any 
part  of  the  world. 

Identification.    The   person    who    presents    an    order    for 


MONEY    AND    INVESTMENTS  305 

payment  must  be  prepared  to  prove  his  identity.  In  case  of 
payment  to  the  wrong  person,  the  Department  will  see  that  the 
amount  is  made  good  to  the  owner,  provided  the  wrong 
payment  was  not  brought  about  through  fault  on  the  part  of 
remitter,  payee,  or  indorsee. 

Power  of  Attorney.  A  money-order  may  be  paid  upon  a 
written  order  or  power  of  attorney  from  the  payee,  as  well  as 
upon  his  indorsement. 

Indorsements.  More  than  one  indorsement  on  a  money-order 
is  prohibited  by  law.  One  or  more  additional  names,  however, 
may  be  written  upon  the  back  of  orders  for  purpose  of  identi- 
fication of  payee,  or  guaranty  of  genuineness  of  signature  of 
the  payee  or  indorsee.  But  if  the  holder  is  the  second  or  any 
subsequent  indorsee,  to  obtain  the  amount  he  must  surrender 
the  order  and  make  application  for  a  duplicate  or  a  warrant  to 
be  issued  in  place  thereof  by  the  Department.  The  stamp 
impressions  which  banks  ordinarily  place  upon  money-orders 
left  with  or  sent  to  them  for  collection  are  not  regarded  as 
indorsements  transferring  ownership  of  the  orders  or  within 
the  meaning  of  the  statute  which  prohibits  more  than  one 
indorsement. 

Repayment.  A  domestic  order  may  be  repaid  at  the  office 
of  issue  within  one  year  from  the  last  day  of  the  month  of  its 
issue. 

Invalid  Orders.  An  order  which  has  not  been  paid  or  repaid 
within  one  year  from  the  last  day  of  the  month  of  its  issue 
is  invalid  and  not  payable.  The  owner,  however,  may  obtain 
payment  of  the  amount  thereof  by  making  application, 
through  the  postmaster  at  any  money-order  office,  to  the 
Department,  for  a  warrant  for  the  said  amount.  The  invalid 
order,  if  in  the  owner's  possession,  must  be  forwarded  with  the 
application. 

Lost  Orders.  In  all  cases  of  lost  orders,  the  remitter,  payee, 
or  indorsee  may  make  application,  through  either  the  office 
at  which  the  original  was  issued  or  the  office  on  which  the 
original  was  drawn,  for  a  duplicate  to  be  issued  in  lieu  thereof. 

No  charge  is  made  for  the  issue  of  a  duplicate  order,  nor  for 
the  issue  of  a  warrant  for  the  amount  of  an  invalid  order. 

Fees.  For  domestic  money  orders  3  cents  to  30  cents,  and 
these  rates  apply  to  orders  payable  in  Canada,  Cuba,  New- 
foundland, the  Philippines,  Tutuila,  and  at  the  U.  S.  Postal 
Agency  at  Shanghai  (China) ;  for  international  money-orders, 
8  to  50  cents,  except  to  the  18  following  countries:  Apia, 
Cape  Colony,  France,  Germany,  Great  Britain,  Greece,  Hon- 
duras (British),  Republic  of  Honduras,  Hongkong,  Italy, 
New  South  Wales,  Portugal,  Queensland,  Russia,  Salvador, 
South  Australia,  Tasmania,  Victoria,  to  which  countries  the  fee 
is  from  10  cents  to  $1. 


306  MONEY    AND    INVESTMENTS 

Postal  Savings  Banks.  A  good  illustration  of  the  postal 
savings  bank  is  a  system  in  vogue  in  the  Philippines.  It  is  set 
forth  by  an  Act  passed  by  the  Philippine  Commission  on  May 
24,  1906,  and  under  which  many  banks  have  been  established. 
It  seems  that  these  institutions  are  divided  into  three  classes. 
At  those  of  the  first  class,  deposits  are  received  and  withdraw- 
als permitted  to  any  amount  not  exceeding,  of  course,  the 
amount  of  deposit.  In  the  case  of  the  second  and  third 
classes,  a  limitation  is  placed  on  amounts  which  it  is  permis- 
sible to  deposit  or  to  withdraw  at  any  one  time;  and  also 
upon  the  aggregate  deposits  which  may  be  made  during  any  one 
month  to  the  credit  of  any  single  account.  Banks  of  the  third 
class  receive  deposits  only  in  the  form  of  postal  savings  bank 
stamps;  while  in  the  first  and  second  classes  both  currency 
and  stamps  are  received  on  deposit. 

In  the  event  of  credits  or  withdrawals  on  the  part  of  chari- 
table or  benevolent  associations,  the  maximum  amount  per- 
mitted is  double  that  of  other  depositors. 

These  postal  savings  bank  stamps,  so  called,  are  on  sale  at 
all  such  banks  in  the  Islands,  and  are  in  denominations  of  5, 
10,  and  20  centavos  (one  centavo  equals  about  one-half  of  our 
cent).  The  purchasers  of  these  stamps  are  furnished,  without 
charge,  cards  arranged  with  ten  or  twenty  spaces  each,  bearing 
a  distinctive  number  and  of  three  different  colours;  this  last 
for  the  three  denominations  of  stamps  which  are  to  be  pasted 
thereon.  When  these  stamp  cards  are  filled  out,  they  may  be 
deposited  in  any  postal  savings  bank  in  the  Islands  in  lieu 
of  money  equivalent  to  their  face  value.  When  such  stamps 
are  deposited,  they  are  cancelled  and  an  entry  is  made  to  the 
depositor's  credit,  but  if  cancelled  they  are  redeemable  at 
face  value  in  postage  stamps.  One  advantage  is  that  one 
may  make  deposits  to  the  credit  of,  or  withdrawals  from, 
his  account  at  any  of  the  postal  savings  banks  in  the  Islands. 
Deposits  in  postal  savings  banks  are  not  subject  to  taxation 
in  the  Philippines,  either  by  provincial,  municipal  or  Insular 
Government. 

From  the  foregoing  an  idea  of  the  principle  of  this  system 
of  savings  may  be  gathered.  The  plan  is  not  a  new  one, 
the  British  Post  Office  Savings  Bank  system  having  been 
started  in  September,  1861,  for  the  general  purpose  of  en- 
couraging savings  on  the  part  of  the  poor.  From  its  very  in- 
ception it  appears  to  have  been  popular,  for,  in  the  first  year 
there  were  453,634  depositors,  with  over  $6,000,000  deposited. 
This  system  has  grown,  until,  at  the  beginning  of  the  calendar 
year  1906  the  deposits  had  reached  the  immense  total  of 
$740,248,862.  At  present,  the  management  of  this  Savings 
Bank  System  results  in  a  small  loss  to  the  Government,  but 


MONEY    AND    INVESTMENTS  307 

it   is   expected   that   before   long   the  system   will    pay  its 
way.1 

Post-Bills.  Issued  by  the  Bank  of  England  for  not  less  than 
£10,  drawn  payable  seven  days  after  sight,  and  "  accepted  " 
at  the  time  of  issue.  These  first  came  into  use  Dec.  14,  1738, 
the  intent  being  to  foil  the  highway  robbers,  as  the  interval  be- 
fore payment  would  be  due  might  give  time  to  stop  pay- 
ment.2 

Post  Dated  Check.  One  dated  ahead.  No  bank  should  pay 
a  check  earlier  than  the  date  entered  upon  it. 

Posted  Rates.  Bankers  dealing  in  foreign  exchange  post  a 
daily  table  of  rates  (or  prices)  for  exchange,  which  is  for  use 
of  the  general  public,  but  may  differ  from  "  actual  rates," 
which  are  private  terms  made  to  brokers  or  other  buyers  for 
large  sums  and  somewhat  less  than  the  "  posted  rates." 
"  Posted  rates  "  are  sometimes  referred  to  as  "  nominal  rates/' 

Post-Office.  A  nickname  for  People's  Gas  Light  &  Coke 
Co.;  the  "  ticker  "  abbreviation  being  "  P.  O." 

Pound.  The  English  3  unit  of  value  (formerly  the  shilling 
was  the  unit)  equal  to  $4.866|  in  United  States  money;  the 
sign  for  it  being  £.  The  adding  of  the  word  "  sterling  "  to 
"  pound,"  is  to  designate  a  pound  in  money  from  a  pound 
in  weight.  Also  the  monetary  unit  of  Egypt,  equivalent  to 
$4.943,  and  written  thus:  £E. 

Pound  Sterling.    See  "  Pound." 

Power  Company  Bonds.  Within  the  last  few  years  this 
class  of  bonds  has  come  into  considerable  prominence.  The 
ability  to  economically  transmit  electrical  energy  a  great 
distance  to  generate  power  is  the  underlying  factor  in  this 
industry.  With  a  good  water-power,  and  a  demand  for  power 
at  satisfactory  prices  within  a  reasonable  distance  of  the 
property,  there  should  be  little  question  as  to  the  success  of 
these  companies  as  a  class.  A  low  cost  of  operating  has  re- 
sulted in  large  profits  in  many  instances.  Far-seeing  finan- 
ciers look  forward  to  a  time  when  either  the  price  or  scarcity 
of  coal  will  create  a  tremendous  demand  for  electricity 
generated  by  water-power,  and  there  is  a  growing  belief  that 
the  better  selected  and  located  of  such  powers  will  become 
very  valuable.  The  rapid  inroads  upon  Niagara  Falls  for  such 
a  purpose,  and  the  enormous  amounts  of  money  which  have 
already  been  spent  there  in  development  of  power  companies, 
is  an  indication  of  this  belief. 

1This  information  upon  the  British  Post  Office  Savings  Bank  System 
was  furnished  the  author  by  Albert  Halstead,  United  States  Consul,  at 
Birmingham,  England. 

J  J.  W.  Gilbart. 

*  Gold  is  believed  to  have  been  first  coined  in  England  in  1344. 


308  MONEY    AND    INVESTMENTS 

In  selecting  power  company  bonds  as  an  investment,  the 
usual  facts  as  regards  class  of  men  behind  the  enterprise, 
management,  contracts  for  business,  etc.,  should  be  taken  into 
consideration.  But  the  main  facts  to  consider  are:  The  suffi- 
ciency of  water-power  for  all  time  to  come,  and  a  plentiful 
water  supply  throughout  the  year;  the  location  of  the  plant 
itself  —  near  enough  to  industries  of  a  stable  character  to 
create  a  permanent  demand  for  the  electricity  generated; 
the  likelihood  of  competition  from  other  water-powers  in  the 
same  section;  if  the  water-power  is  not  owned,  the  right  to 
operate  same  must  endure  for  a  longer  period  than  the  life 
of  the  bond  issue;  and,  finally,  the  climatic  conditions  under 
which  power  is  generated  and  distributed,  and  the  cost  of  fuel 
in  that  particular  section,  should  be  carefully  studied. 

To  illustrate  with  regard  to  this  last:  In  California,  the 
price  of  coal  is  high,  likewise  fuel  oil,  except  in  sections  fa- 
vourably located  as  regards  the  oil  wells.  That  State  is  practi- 
cally free  from  thunder  and  lightning,  and  many  of  the  plants 
are  situated  in  sections  of  almost  perpetual  summer,  all  of 
which  is  conducive  to  cheap  maintenance. 

In  some  of  the  mining  regions  of  Mexico  most  of  the  fuel  is 
brought  on  the  backs  of  donkeys,  making  the  cost  of  generating 
steam  power  very  great  (about  $200  per  horse-power  per 
year).  Many  water-power  companies  can  sell  power  very 
profitably  at  $25  per  horse-power. 

It  does  not  follow  that  the  conditions  mentioned  in  the  last 
two  paragraphs  are  essential  to  the  successful  conduct  of  such 
a  company,  but  are  some  of  the  things  favourable  to  success. 

Other  facts  conducive  to  economical  management  in  the 
operating  of  enterprises  of  this  nature  are,  that  they  are 
naturally  free  from  the  dangers  of  anti-trust  legislation, 
labour  disputes,  devastating  fires,  catastrophies,  such  as 
wholesale  railroad  accidents,  and  abnormal  rises  in  the  cost 
of  raw  materials,  some,  or  all,  of  which  factors  may  have  to 
be  considered  in  other  industries. 

Inasmuch  as  "  power  bonds  "  are  a  somewhat  new  security 
upon  the  market  the  investor  has  been  able  to  obtain  profitable 
interest  returns  by  purchasing  them,  but  there  is  very  little 
question  as  to  the  extremely  safe  character  of  many  of  these 
issues. 

Power  of  Attorney.  In  financial  matters,  a  written  or  printed 
paper  signed  —  and  witnessed  or  acknowledged  before  a  justice 
of  the  peace  —  given  by  one  person  to  another,  whereby  the 
latter  receives  authority  to  sign  a  paper  or  document,  etc., 
in  the  former's  name  and  stead,  such  signature  having  the 
same  force  and  value  as  if  signed  by  the  person  delegating  the 
authority.  "  Powers  of  attorney  "  are  much  used  in  the 
transfer  of  stock  certificates. 


MONEY    AND    INVESTMENTS  309 

It  is  necessary  that  a  "  power  of  attorney,"  in  order  to 
confer  any  authority  upon  a  person,  must  specify  the  powers 
conferred.  The  language  used  may  be,  and  frequently  is, 
general  and  somewhat  vague,  in  which  case,  it  is  a  question 
of  construction  of  the  instrument  whether  any  particular 
power  has  been  conferred,  but  a  "  power  of  attorney  "  in 
order  to  constitute  a  person  an  attorney  to  perform  any 
particular  act  must  have  some  language  specifying  the  powers 
conferred  and  which  the  attorney  may  exercise  on  behalf  of 
his  principal. 

A  common  form  of  "  Power  of  Attorney  "  used  in  the 
transfer  of  stocks: 


all  i«tn  fji>  ti)tsr 

T#  A  T - — „- 

for  value  received,  have  bargained,  sold,  assigned  and  transferred,  and  by 
these  presents  do  bargain,  sett,  assign  and  transfer  unto . 

Shares  of  the STOCK   of  the 


standing  in name  on  the  books  of  the  said. 

represented  by  certificate  Xo 


And do  hereby  constitute  and  appoint 


true  and  lawful  attorney,    IRREVOCABLY,  for and 

in name  and  stead  but  to use,  to  sell,  assign,  transfer, 

and  make  over  all  or  any  part  of  the  said and  for  that  purpose  to 

make  and  execute  all  necessary  acts  of  assignment  and  transfer  thereof,  and 
to  substitute  one  or  more  persons  with  like  full  power,  hereby  ratifying  and 

confirming  all  that  said  attorney _or 

. substitute   or  substitutes    shall  lawfully  do   by  virtue   hereof. 


In  Witness  whereof, have  hereunto  set. 

hand  and  seal  at the 


day  of .190. 


Signed,  Sealed  and  Delivered  in  the  presence  of 


310  MONEY    AND    INVESTMENTS 

Power  of  Sale.  A  clause  inserted  in  a  mortgage  note  or  in 
any  other  form  of  indebtedness  which  gives  the  lender  the 
right  to  sell  the  property  securing  the  debt,  if  not  paid  as 
specified.  Wills  sometimes  give  "  power  of  sale  "  to  executors, 
that  property  may  be  converted  into  cash. 

P.  P.  These  letters  are  in  place  of  "  pro  procuration,"  to 
which  refer. 

PR.    The  "  ticker  "  abbreviation  for  "  preferred." 

Pref.    Preferred. 

Preference  Bonds.  Practically  the  same  as  "  income 
bonds." 

Preference  Income  Bonds.    See  "  Income  Bonds." 

Preference  Shares.  The  term  used  in  England  as  the 
equivalent  of  the  American  "  preferred  stock." 

Preferred  Creditor.  One  who  is  legally  entitled  to  an  ad- 
vantage over  other  creditors;  entitled  to  payment  of  his  claim 
in  full  before  other  creditors,  not  preferred,  are  paid  anything. 

Preferred  Ordinary  Stock.  This  will  be  understood  by 
reading  "  Preferred  Shares  (or  Stock)." 

Preferred  Shares  (or  Stock).  In  Great  Britain  "  ordinary 
stock,"  so-called,  is  equivalent  to  our  "  common  stock." 
When,  however,  the  "  ordinary  stock "  is  divided  in  two 
parts,  the  first  half  is  referred  to  as  "  preferred  "  and  the 
second  half  .as  "  deferred;  "  also  mentioned  as  "  B  "  and  "  A  " 
stocks  respectively.  As  a  rule,  the  former  not  only  ranks 
ahead  of  the  latter  as  far  as  the  dividend  is  concerned,  but 
shares  equally  with  it  in  the  case  of  any  winding  up  of  the 
company. 

When  a  dividend  is  declared,  it  is  the  common  practice  to 
declare  it  on  the  "  ordinary  stock,"  and  then  to  state  the 
relative  amounts  for  the  two  classes. 

These  stocks  are  not,  as  a  rule,  "  cumulative."  Those  which 
are  "  cumulative  "  are  known  as  "  non-contingent  preference 
stocks." 

"  Preferred  stock,"  in  England,  is  not  the  equivalent  of 
the  American  "  preferred  stock,"  for  explanation  of  which 
see  next  subject;  "preference  shares"  being  the  English 
equivalent. 

Preferred  Stock.  A  stock  which  has  a  claim  upon  the  prop- 
erty and  earnings  of  a  corporation  prior  to  some  other  stock; 
that  is,  it  comes  after  the  bonds  and  floating  debt,  if  any, 
but  ranks  ahead  of  what  is  known  as  "  common  stock." 
When  a  "  preferred  stock  "  is  created,  it  naturally  follows 
that  it  precedes  another  issue,  called  "  common  stock." 
The  first  mentioned  stock  is  about  what  its  name  indicates,  — 
it  has  preference  over  the  common.  The  form  of  this  pref- 


MONEY    AND    INVESTMENTS  311 

erence  differs  in  various  corporations,  but,  as  a  rule,  in  case 
of  the  winding  up  of  the  corporation,  the  preferred  stock- 
holders have  the  right  to  be  paid  out  of  the  assets  before  the 
common  stockholders  receive  anything.  The  conditions  as 
to  the  payment  of  dividends  on  "  preferred  stocks  "  also  vary. 
In  some  cases,  a  dividend  must  be  paid  if  earned;  in  other 
cases,  it  must  be  paid  before  any  dividend  upon  the  "  common 
stock."  It  may  be  "cumulative"  (see  "Cumulative")  or, 
after  the  common  stock  has  received  an  equal  amount,  both 
may  share  alike  and  so  on.  The  most  common  way,  however, 
is  to  give  the  "  preferred  stock  "  the  first  claim  upon  dividends 
up  to  a  certain  per  cent.  The  best  example  of  this  is  in  the 
case  of  the  American  Sugar  Refining  preferred  stock,  which  is 
entitled  to  receive  7%  per  annum  before  the  common 
receives  any.  In  this  case,  the  earnings  of  the  company  are 
so  large  that  the  common  stock,  in  actual  practice,  receives  a 
higher  rate  of  dividend  than  the  "  preferred,"  and  sells  in  the 
market  at  a  higher  price.  Most  common  stocks,  however, 
sell  at  a  lesser  price  than  the  preferred. 

There  are  numerous  cases  of  "  first  "  and  "  second  pre- 
ferred "  issues,  the  nature  of  their  preference  being  somewhat 
different  from  each  other,  but  both  have  preference  over  the 
common  shares.  Sometimes  "  class  A  "  and  "  class  B  "  pre- 
ferred stocks  are  issued,  being  simply  another  nomenclature 
for  "  first  "  and  "  second  preferred." 

Preferred  shareholders,  usually,  but  not  always,  have  the 
right  to  vote  at  stockholders'  meetings.  In  some  instances 
the  voting  right  per  share  is  greater  on  the  preferred  than  upon 
the  common  stock. 

Prem.    Short  for  "  premium." 

Premium.  The  percentage  or  price  of  a  security  in  excess 
of  its  par  or  face  value.  Taking  the  face  value  as  $100,  a  share 
of  stock  selling  at  105  would  be  selling  at  5%,  or  $5  per  share, 
premium.  The  par  values  of  various  securities  differ,  how- 
ever (see  "  Par"),  therefore  it  does  not  argue  that  if  a  share 
of  stock  is  quoted  at  150  it  is  selling  at  a  premium,  for  if,  by 
chance,  the  face  value  of  that  share  happens  to  be  $500,  it 
would  really  be  selling,  not  at  a  premium  at  all,  but  at  a 
material  discount.  There  are  exceptions  to  this,  for  which 
see  reference  to  the  stock  exchange  rules  under  "  Par." 

Premium  has  other  meanings,  for  which  see  "  Agio  "  and 
"  Bonus,"  by  the  use  of  either  of  which  a  premium  may  be 
understood.  Gold  is  at  a  premium  when  in  order  to  obtain  a 
dollar  in  gold  it  is  necessary  to  give  more  than  a  dollar  in 
some  other  money;  at  least,  gold  would  be  selling  at  a  pre- 
mium in  relation  to  that  particular  money.  During  1893 
there  was  a  "  premium  on  currency;  "  currency  was  so  scarce 
that  in  order  to  obtain  enough  for  most  pressing  needs,  cer- 


312  MONEY    AND    INVESTMENTS 

tified  checks  were  given  at  the  rate  of  $104  Jor  $100  in 
currency.  Currency  was  at  4%  "  premium." 

The  yearly  payments  upon  life  insurance  policies  are  known 
as  "  premiums." 

The  price  paid  for  an  "  option  "  (see  "  Options  ")  is  called 
"  premium." 

Premium  Bonds.  The  City  of  New  Orleans  has  bonds  out- 
standing known  by  the  above  title.  It  seems  that  they  are 
of  a  small  denomination  and  the  interest  upon  them  is  not 
paid  until  they  are  drawn  for  redemption  by  lot;  then  the 
principal,  together  with  simple  interest  from  July,  1875,  is 
paid  the  holder.  There  are  also  prizes  which  amount  to  about 
$100,000,  which  are  likewise  annually  distributed  among 
those  whose  bonds  are  redeemed.  These  prizes,  or  premiums, 
range  from  $20  to  $5,000.  The  United  States  Government 
has  recently  looked  upon  this  as  a  lottery  scheme,  and  has 
issued  an  order  barring  such  bonds  from  the  mail. 

Premium  of  Exchange.    See  "  Exchange." 

Presentment.    See  "  Protest." 

Present  Standard  of  Weight  and  Fineness.  See  "  Payable 
in  Gold." 

Price.1     The  money  equivalent  or  value  of  anything. 

Prices.  The  financial  writer,  in  order  to  avoid  reiteration 
in  referring  to  the  advance  or  fall  of  prices,  uses  a  countless 
number  of  words  to  denote  such  changes,  among  which  are  the 
following: 

Denoting  an  advance:  up,  crossed,  rise,  forged  ahead,  up- 
wards, boomed,  sky-rocketed,  jumped,  put  up,  tended  up- 
ward, bid  up,  uplift,  improved,  rally,  move  forward. 

Denoting  a  fall:  reversion,  set  back,  lost,  fell  back,  got 
down,  declined,  fell,  dropped,  slid  off,  slid  down,  depressed, 
worked  back,  worked  off,  off,  yielded,  reacted,  eased,  eased  off, 
softened,  shaded,  retreated,  settled,  dipped,  tumbled. 

Primary  Points.  Large  Western  cities  such  as  Chicago, 
Minneapolis,  etc.,  where  grain  is  received  directly  from  the 
country  districts. 

Primary  Receipts.  The  aggregate  receipts  of  grain  each 
day  at  all  "  primary  points." 

Primary  Shipments.  The  aggregate  daily  grain  shipments 
from  all  "  primary  points  "  to  the  points  of  consumption. 

1  Chevalier  says:  "  The  price  of  a  certain  thing  is  its  value  in  relation 
to  a  substance  specially  designated,  that  is  to  say,  to  the  material  of  which 
money  is  made.  Thus,  whilst  in  ordinary  language  we  often  confound  these 
two  words,  value  and  price,  and  use  them  as  synonymous  terms,  they 
have  in  reality  a  distinct  meaning.  Both  have  a  relative  sense;  but  value 
is  a  more  general  and  indeterminate  expression,  or  to  use  a  better  word, 
more  vague;  price  is  more  special,  and  has  a  meaning  perfectly  precise." 


MONEY    AND    INVESTMENTS  313 

Prime.    First  class;   good. 

Prime  Investments.  Those  which  are  considered  sound, 
conservative,  and  safe. 

Principal.  The  principal  of  a  bond,  or  any  other  security, 
is  its  face  value;  that  is,  the  amount  regardless  of  interest  or 
premium,  which  the  investor  is  entitled  to  receive  at  the 
maturity  of  the  obligation;  the  sum  on  which  the  charge 
for  interest  is  reckoned.  "  Par  value  "  denotes  the  "  prin- 
cipal "  of  a  share  of  stock. 

Also  the  customer  of  a  broker.  (Read  footnote  to  "  In- 
come.") 

Prior  Lien.    See  "  Lien." 

Prior  Lien  Bonds.  If  a  bond  bearing  this  title  is  honestly 
what  the  name  would  indicate  it  to  be,  it  should  take  pre- 
cedence over  any  other  mortgages  (or  bonds)  against  the 
property;  that  is,  it  should  technically  be  prior  to  any  other 
indebtedness.  The  juggling  with  security  names,  with  the 
evident  intent  of  misleading  the  investor,  however,  has  re- 
sulted in  "  prior  lien  bonds  "  being  issued  which  may  be 
prior  in  their  rights  to  some  other  indebtedness  of  the  com- 
pany, but  an  investigation  shows  that  there  are  other  mort- 
gages prior  to  the  one  in  question.  Therefore,  it  behoves 
one  in  purchasing  a  "  prior  lien  bond  "  to  ascertain  just  ex- 
actly what  its  claim  is  upon  the  property. 

Prior  Redemption.    See  "  Called  Bonds." 

Private  Bankers.  Those  receiving  deposits  and  carrying  on 
the  general  business  of  banking,  but  not  incorporated,  and  so 
not  under  State  or  Government  control,  as  national  or  State 
banks.  A  large  part  of  the  buying  and  selling  of  investment 
securities  is  in  the  hands  of  the  "  private  bankers." 

Private  Discounts  at  Berlin  (or  other  points).  The  rate  at 
which  firms  or  individua  s  of  known  good  financial  standing 
can  borrow  at  the  point  named;  i.  e.  the  rate  at  which  their 
paper  will  be  discounted,  but  which  rate  is  distinguished  from 
the  Bank  of  Germany  rate.  "  Private  discounts  "  abroad 
are  other  rates  than  those  of  the  Government  controlled 
banks. 

Private  Wire  Houses.  Those  having  telegraph  wires  or 
telephones  for  their  own  exclusive  use,  and  which  connect 
them  with  their  branches  in  other  places,  or  with  certain 
other  houses  in  the  large  centres. 

Privilege.     See  "  Options,"  meaning  the  same 

Privilege  of  Registration.  Many  bonds  are  issued  in  coupon 
form,  but  with  the  right  reserved  to  the  holder  to  have  the 
same  registered  either  as  to  principal  or  interest,  or  both,  as 
the  case  may  be,  but  the  holder  of  the  bond  is  not  obliged  to 


314  MONEY    AND    INVESTMENTS 

exercise  this  privilege  unless  he  so  desires.     (See  "Registered 
Bond.") 

Proceeds.  As  used  in  the  discounting  of  a  note,  it  is  the 
amount  which  the  borrower  obtains  after  deducting  the 
"  discount."  (See  "  Discount.") 

Professional.  There  seems  to  be  some  doubt,  even  upon 
the  part  of  the  best  financial  writers  of  our  leading  newspapers, 
as  to  just  what  a  "  professional  "  speculator  is,  as  is  evidenced 
by  the  following: 

"  Professional  is  really  nothing  more  nor  less  than  '  ha- 
bitual.' 

"  Apparently  there  is  a  certain  section  of  the '  public  '  which 
speculates  practically  all  the  time,  or  almost  all  of  the  time, 
.  .  .  while  the  rest  of  the  '  public  '  speculates  only  at  inter- 
vals more  or  less  rare.  Possibly  at  times  the  word  '  profes- 
sional '  is  used  to  designate  something  more  in  the  way  of  a 
promoter  or  a  speculative  banker,  or  some  other  part  of 
purely  Wall  Street  machinery.  But  in  the  general  sense  of 
the  word,  it  probably  means  simply  that  portion  of  the 
community  which  habitually  speculates."  (See  also  "  Tra- 
ders.") 

Professional  Traders.    See  "  Traders." 

Profit.  When  a  security  is  sold  for  more  than  cost,  or 
appreciates  in  value  above  cost;  when  a  business  at  the  end 
of  a  stated  period  has  earned  more  money  than  the  cost  of 
operating,  it  is  said  to  have  been  "  run  at  a  profit."  (See 
"  Net  Profits.") 

Profit  and  Loss.  The  bookkeeping  term  used  as  a  heading 
under  which  are  entered  the  profits  and  losses  of  a  concern, 
and  would  be  on  the  credit  or  debit  side  of  the  account  ac- 
cordingly. Formerly  it  was  customary,  and  is  now  with  some 
bookkeepers,  to  make  an  entry  of  a  loss  in  red  ink,  from  whence 
arose  the  term  "  in  the  red,"  always  indicating  a  loss.  The 
modern  system  of  bookkeeping  calls  for  the  use  of  as  little  red 
ink  as  possible,  and  to  quite  an  extent  the  use  of  red  ink 
has  been  discontinued  for  a  loss  entry.  The  abbreviation 
"  P.  &  L."  stands  for  "  profit  and  loss." 

Promissory  Note.  A  written  promise  on  the  part  of  one 
person  to  pay  another  or  order  a  stated  sum  of  money  at  some 
future  time.  (See  "  Note.") 

Promoter.1  One  who  finds  the  bankers,  or  moneyed  men 
to  finance;  that  is,  furnish,  through  their  clients  or  otherwise, 
the  necessary  capital  to  organize  and  set  in  motion  a  corpora- 

1  A  bill  introduced  in  the  New  York  Legislature  denned  a  "  promoter  " 
as  being  every  person,  by  whatever  name,  who  brings  together  the  persons 
to  become  interested  in  the  enterprise,  aids  in  securing  subscriptions,  and 
sets  in  motion  machinery  which  leads  to  the  promotion  of  a  corporation. 


MONEY    AND    INVESTMENTS  315 

tion  or  industry;  the  "  middleman,"  as  it  were,  between  the 
corporation  needing  the  capital,  and  those  whose  business  it  is 
to  place  the  corporation's  securities  upon  the  market;  in  other 
words,  sell  them  to  their  clients. 

The  "  promoter  "  does  not  attempt  to  sell  securities  directly 
to  the  investor,  but  rather  wholesales  them  to  those  who  do, 
such  as  bankers,  etc. 

Perhaps  no  better  illustration  of  the  work  performed  by  a 
"  promoter  "  can  be  given  than  that  of  E.  S.  Meade  in  his 
"  Trust  Finance  "  as  follows:  "  The  promoter  performs  an 
indispensable  function  in  the  community  by  discovering, 
formulating,  and  assembling  the  business  propositions  by 
whose  development  the  wealth  of  society  is  increased.  He 
acts  as  the  middleman  or  intermediary  between  the  man  with 
money  to  invest  in  securities  and  the  man  with  undeveloped 
property  to  sell  for  money.  In  the  present  scheme  of  pro- 
duction, the  resource  and  the  money  are  useless  apart.  Let 
them  be  brought  together,  and  wealth  is  the  result." 

A  "  promoter  "  is  one  who  often  makes  it  his  occupation 
to  hunt  up  corporations  which  desire  to  issue  securities,  and 
bring  such  securities  to  the  attention  of  some  banker,  and,  in 
case  of  the  issue  being  found  satisfactory  and  accepted  by 
the  latter,  the  "  promoter  "  receives  a  commission  or  fee  for 
his  services.  It  may  almost  be  said  that  he  is  a  manufacturer 
of  stocks  and  bonds.  A  "  promoter  "  must  not  be  confused 
with  a  banker,  although  the  latter  may,  at  times,  be  a  "  pro- 
moter," for  he  may  occasionally  originate  the  idea,  for  in- 
stance, of  building  a  new  railroad,  and  carry  through  all  the 
details  of  its  coming  into  existence;  create  the  securities  and 
wholesale  them  in  part  or  entire  among  other  bankers.  In 
such  a  case,  he  is  a  "  promoter  "  of  that  particular  enter- 
prise.1 

The  honest  and  enterprising  "  promoter  "  has  been  one  of 
the  most  useful  agents  in  the  development  of  this  great 
country. 

Promoter's  Shares  (or  Stock).  An  English  term  but  little 
used  in  America;  stock  issued  with  limited  privileges  in  pay- 
ment for  services  rendered  by  those  instrumental  in  organiz- 
ing or  financing  a  corporation. 

Prompt  Shipment.  A  Chicago  Board  of  Trade  term  calling 
for  shipment  within  ten  business  days. 

Proprietary  Shipment.  "  Controlling  company "  is  the 
usual  term,  and  is  explained  under  "  Operating  Company." 

Pro  Rata  Rate.  (As  used  in  insurance.)  A  rate  is  based  on 
a  year's  period  of  time.  A  "  pro  rata  rate  "  is  the  proportion 

1  Some  wit  once  said  that  a  "  promoter  "  would  furnish  the  ocean  if 
some  one  else  would  furnish  the  ships. 


316  MONEY    AND    INVESTMENTS 

of  the  yearly  rate  which  the  period  of  time  that  policy  is  in 
force  bears  to  one  year. 

Prospectus. l  A  description,  generally  printed,  but  some- 
times typewritten,  setting  forth  the  plan  of  some  enterprise 
about  to  be  undertaken.  It  differs  from  a  "  circular  "  in  its 
use  among  bankers  as  being  more  a  detailed  description  of 
some  issue  of  securities  and  of  the  property  covered  by  them, 
and  for  distribution  among  what  are  known  as  "  under- 
writers "  or  the  few  who  are  invited  to  share,  to  a  certain 
extent,  in  the  profits  resulting  from  the  sale  of  the  issue  when 
offered  to  the  public  at  some  later  time.  The  description  of 
the  same  securities  and  property,  when  offered  for  general 
sale  to  the  public,  would  be  called  a  "  circular,"  although 
perhaps  this  fine  distinction  in  the  meaning  of  the  two  words 
is  not  always  strictly  followed.  The  two  words  are  used  to  a 
certain  extent  interchangeably. 

Protest.  A  formal  declaration  that  negotiable  paper  has 
been  dishonoured. 

It  is  customary  to  send  to  "  protest  "  a  note,  draft,  or  check, 
which  is  not  paid  upon  proper  presentation,  unless  instructions 
to  the  contrary  are  understood  by  the  bank.  That  is,  it  is 
customary  whether  the  paper  is  "  foreign  "  (see  "  Foreign  Bill ") 
or  "  domestic."  It  should,  however,  always  be  done  in  the 
former  case.  This  means  that  the  paper  is  formally  again 
presented  to  the  one  responsible  for  its  payment  by  a  notary 
public,  who,  on  the  same  day,  makes  a  note  on  the  paper 
itself  to  the  effect  that  it  is  dishonoured. 

He  then  makes  out  a  certificate  of  "  protest;  "  attaches 
the  dishonoured  paper,  or  copy  thereof,  sets  forth  the  time 
of  and  place  where  presented,  the  fact  that  he  has  presented 
it,  and  the  reasons  for  protesting.  Then  he  affixes  his  signa- 
ture and  seal. 

Some  of  the  larger  banking  institutions  employ  clerks  who 
are  notaries,  and  presentation  by  such  takes  the  place  of  the 
employment  of  an  outside  notary. 

If,  upon  presentation  by  the  notary,  payment  is  then  re- 
fused, written  "  notice  of  protest,"  as  it  is  called,  should  be 

1  A  legislative  act,  which  failed  of  passage,  described  a  "  prospectus  " 
as  being  any  announcement,  circular,  advertisement,  or  notice  of  every 
kind  on  behalf  of  any  corporation,  organized  or  to  be  organized,  or  in  behalf 
of  any  person  interested  in  the  formation  of  such  corporation,  with  a  view 
of  obtaining  subscriptions  to,  or  the  purchase  of,  the  securities  of  such 
corporation. 

The  State  of  New  York  has  passed  an  Act,  popularly  known  as  the 
"  False  Prospectus  Act,"  which  prohibits  the  making  or  publishing  of  false 
or  exaggerated  statements  of  publications  of  or  concerning  the  affairs, 
pecuniary  condition,  or  property  of  any  corporation,  joint-stock  association, 
copartnership,  or  individual,  with  the  idea  of  giving  misleading  information 
as  to  the  apparent  value  of  the  security  or  property. 


MONEY    AND    INVESTMENTS  317 

promptly  delivered  or  mailed  not  only  to  the  last  indorser 
upon  the  paper,  but  preferably  also  to  all  preceding  indorsers. 
To  hold  preceding  indorsers  it  is  desirable  that  each  subse- 
quent indorser  should  send  them  like  notice,  unless  this  was 
done  by  the  one  who  "  protested  "  it.  In  practice,  it  is  not 
supposed  that  the  holder  at  the  time  of  "  protest  "  has  the 
post-office  addresses  of  all  preceding  indorsers,  so  it  is  custom- 
ary for  him  to  make  out  the  notice  of  protest  to  each  of  the 
indorsers  and  mail  them  all  to  the  last  indorser,  letting  the 
latter  mail  them  all,  with  the  exception  of  his  own,  to  the 
next  preceding  indorser,  and  so  on  down  the  line. 

A  sight  draft,  upon  which  "  grace  "  is  allowed,  will  not  be 
"  protested  "  until  the  expiration  of  the  same.  A  draft  read- 
ing, for  instance,  "  10  days'  sight  "  will  be  presented  for 
"acceptance"  (see  "  Draft"),  and  if  it  is  a  "foreign  bill," 
and  acceptance  is  refused,  will  then  be  presented  by  a  notary, 
and  if  still  refused,  protested  for  non-acceptance. 

A  note  must  be  presented  upon  the  date  due  in  order  to 
hold  the  indorsers.  When  the  depositor  of  a  bank  includes  in 
his  deposit  a  check  or  draft  bearing  only  his  indorsement 
upon  which  payment  is  refused  it  is  not  customary  to  "  pro- 
test "  it,  as  it  is  sufficient  to  return  the  instrument  to  the  de- 
positor, and  charge  the  amount  to  his  account,  thus  saving 
"  protest  "  expenses. 

Should  a  person  primarily  liable  on  an  instrument  be  dead 
when  the  proper  time  for  presentment  falls  due,  and  no  place 
of  payment  is  specified,  the  paper  should  be  presented  to  the 
deceased's  personal  representative,  if  there  be  such,  and  if 
with  the  exercise  of  reasonable  diligence  he  can  be  found. 

The  fees  charged  by  the  notary  for  "  protest  "  must  be  paid 
either  by  the  indorser  or  maker  of  the  paper.  The  holder  of 
the  note  is  charged  with  the  fees  in  case  of  total  inability  to 
make  collection.  On  some  paper,  where  there  are  no  in- 
dorsements, it  may  not  be  desirable  to  allow  the  same  to  go 
to  "  protest,"  and  the  words  "  waive  protest,"  or  similar  ones 
of  same  intent,  may  accompany  the  instrument  on  a  separate 
slip  of  paper  which  is  detached  before  presentation. 

Or  an  indorser  may  write  above  his  signature  "  protest 
waived,"  in  which  event  it  would  be  unnecessary  to  "  protest  " 
in  order  to  hold  him. 

The  law  generally  considers  that  a  notice  of  "  protest  " 
mailed  at  the  proper  time  at  the  general  post-office  is  sufficient 
notice  to  the  indorsers  or  makers. 

The  reason  for  protesting  is  that  in  order  to  hold  parties 
to  an  instrument  it  must  be  presented  for  payment  upon  the 
proper  date  and  at  the  proper  place,  and  law  demands  the 
certificate  of  a  notary  public  to  that  effect  as  evidence. 

This  is  true,  however,  only  of  what  are  known  as  "  foreign 


318  MONEY    AND    INVESTMENTS 

bills;  "  that  is,  a  check,  draft,  or  note,  drawn  outside  the 
State  from  that  in  which  it  is  presented  for  payment.  Custom- 
arily, however,  most  instruments  of  this  kind,  whether  "  for- 
eign bills  "  or  not  are  "  protested,"  as  it  is  good  evidence  in 
case  of  legal  action. 

Naturally,  the  laws  of  the  different  States  are  somewhat  at 
variance  regarding  the  necessity  for  "  protesting  "  different 
classes  of  paper.  Some  States  may  hold  that  it  is  not  neces- 
sary to  "  protest  "  a  note  to  hold  either  indorsers  or  maker; 
that  it  is  merely  good  evidence  that  the  same  has  been  pre- 
sented to  do  so.  But,  in  any  event,  information  given  above 
would  be  likely  to  err  on  the  safe  side. 

Protested  for  Non- Acceptance.    See  "  Protest." 

Protest  Waived.    See  "  Protest." 

Provisional  Certificates.  This  is  an  English  term  for  our 
"  interim  certificates." 

Provision  Pit.    See  "Pit." 

Proxy.  In  incorporated  companies  the  business  is  delegated 
to  officers  who  are  elected  at  a  meeting  held  by  the  various 
stockholders,  and  each  holder  of  stock  is  entitled  to  one  vote 
for  each  share  which  he  owns.  At  times  he  may  not  deem 
it  necessary,  or  may  find  it  impossible,  to  attend  the  meeting, 
and,  in  order  that  he  may  not  lose  his  vote,  he  may  authorize 
some  other  person  to  vote  his  stock  for  him.  This  authority 
is  called  a  "  proxy,"  and  is  represented  in  writing  by  a  paper 
properly  signed  and  witnessed,  which  confers  to  such  other 
person  the  right  to  vote  for  the  person  giving  the  "  proxy." 

Since  there  have  been  so  many  instances  of  continued  con- 
trol (unsatisfactory)  of  corporations  by  the  aid  of  proxies,  it 
behoves  all  persons  to  give  this  method  of  delegating  their 
voting  rights  careful  thought. 

This  is  common  form  of  a  "  proxy:  " 

Know  all  men  by  these  Presents,  That the  undersigned,  Stock- 
holder in  the_ 

do    hereby  appoint true  and  lawful 

Attorney,  with  power  of  substitution,  for and  in ,  to  vote  at 

the  meeting  of  the  stockholders  in  said to  be  held  at 

,  or  at  any  adjournment  thereof, 

with  all  the  powers should  possess  if  personally  pres- 
ent, hereby  revoking  all  previous  proxies. 

190 

Witness 


MONEY    AND    INVESTMENTS  319 

Public.  All  investors  or  speculators  not  in  the  business  of 
buying  and  selling  securities  for  others,  or  who  do  not  make 
speculation  a  business.  "  The  investing  public;  "  those  upon 
whom  the  banker  and  broker  depend  for  their  patronage. 

Public  Accountant.  The  same  as  an  "  auditor,"  to  which 
refer. 

Public  Debt.    See  "  United  States  Public  Debt." 

Public  Depository.  Any  banking  institution  lawfully 
selected  to  accept  deposits  of  public  money.  The  institution 
(one  or  more)  in  which  the  funds  of  a  State  are  deposited  is 
of  this  class. 

Public  Deposits.  As  used  in  the  Bank  of  England  weekly 
statements;  Government  deposits. 

Public  Funds.  In  reality,  bonds  issued  by  a  Government 
(and  the  Government  debt  is  so  termed  in  Great  Britain),  but 
by  usage  in  America  also  bonds  of  States,  cities,  counties, 
towns,  etc. 

Public  Loan.    Interest-bearing  Government  indebtedness. 

Public  Service  Corporation.  Railway,  street  railway,  gas, 
telephone,  electric  light,  water  companies,  etc. 

Public  Utilities  Companies.    Same  as  last  subject. 

Pullman.  The  Pullman  Co.,  formerly  the  Pullman  Palace 
Car  Co. 

PUR.    The  "  ticker  "  abbreviation  for  "  purchasing  receipt." 

Purchased  Line  (or  Lines)  Mortgage.  A  railroad  may  pur- 
chase all,  or  the  controlling  interest  in,  one  or  more  other  lines 
of  railroad,  which  roads  in  themselves,  perhaps,  were  not  of 
very  high  standing  until  purchased  by  the  company  first  men- 
tioned. There  may  be  some  reason  why  the  purchasing  com- 
pany cannot  issue  more  bonds  of  its  own  for  the  needs  of  the 
purchased  line  (or  lines)  and,  therefore,  may  issue  a  mortgage 
directly  upon  the  purchased  line  (or  lines)  itself,  but  the  mort- 
gage may  bear  the  name  of  the  owning  railroad,  but,  in  case 
of  default  in  the  interest  or  principal  the  owner  could  only 
look  to  the  property  actually  mortgaged  for  his  protection. 
Of  course,  the  terms  of  such  mortgages  vary  greatly,  but,  as  a 
rule,  a  "  purchased  line  mortgage  "  is  only  a  mortgage  upon 
the  line  actually  purchased  and  not  any  obligation  of  the 
parent  company,  unless  guaranteed  by  the  same. 

Purchase  Money  Bonds.  Bonds  commonly  given  by  one 
corporation  in  exchange  for  the  stock  of  some  other  corpora- 
tion purchased  by  the  former.  An  example  is  that  of  the 
Kings  County  Electric  Light  &  Power  Co.,  of  Brooklyn, 
N.  Y.,  which  bought  the  entire  capital  stock  of  the  Edison 
Electric  Illuminating  Co.  In  paying  for  this  stock,  the  former 
company  issued  "  purchase  money  bonds "  in  exchange. 


320  MONEY    AND    INVESTMENTS 

These  bonds  are  secured  by  deposit  of  the  Edison  Company's 
shares  with  the  trustee,  and  by  a  lien  upon  the  properties  of 
the  Kings  County  Company,  subject  to  an  issue  of  $2,500,000 
first  mortgage  5s.  The  "  purchase  money  bonds  "  are  ad- 
ditionally secured  by  deposit  with  the  trustee  of  a  cash  guaran- 
tee fund  of  $1,000,000. 

Purchasing  Receipt.  A  temporary  receipt,  issued  to  the 
purchaser  of  a  security,  to  be  taken  up  later  by  the  permanent 
security  when  issued.  Often  referred  to  as  a  "  temporary 
receipt/'  to  which  subject  refer. 

Put.  A  "  put  "  is  a  contract  which  gives  its  possessor  the 
right  to  deliver,  to  the  party  signing  the  same,  a  certain 
amount  of  stock  (grain  or  other  commodity)  at  a  named  price 
during  the  time  stated  in  the  contract.  (In  London  the 
privilege  conveyed  in  a  "  put  "  can  only  be  exercised  on  the 
last  day  of  the  time  limit;  in  New  York  it  may  be  exercised 
any  time  within  its  life.)  The  party  willing  to  execute  such 
a  contract,  in  consideration  of  the  sum  received,  believes  that 
the  security  will  not  be  more  than  this  sum  below  the  price 
named  in  the  "  put  "  during  its  life  (or  at  the  maturity  of  the 
same),  thus  making  it  no  object  for  the  owner  of  the  "  put  " 
to  deliver  the  security. 

"  Puts  "  are  dealt  in  more  extensively  in  London  than  in 
America.  A  "  put,"  as  executed  in  New  York,  may  read  as 
follows:  "  For  value  received,  the  bearer  may  deliver  me  on 
one  day's  notice,  except  last  day  when  notice  is  not  required, 
100  shares  of  the  capital  stock  of  the  Arctic  Electric  Co.  at 
$175  per  share  any  time  within  30  days  from  date."  Then 
follows  the  signature,  time  of  expiration,  and  an  agreement 
that  all  dividends  paid  upon  the  stock  in  the  meantime  shall 
accompany  the  stock  in  case  of  the  rights  of  the  "  put  "  being 
exercised. 

Put-and-Call.    See  "  Straddle,"  meaning  the  same. 

Put  o'  More.     Same  as  "  Put  of  More." 

Put  of  More.     See  "  Call  of  More." 

Puts  and  Calls.  See  the  two  separate  subjects,  "  Puts  " 
and  "  Calls." 

Put  under  Cover.  A  "  bucket  shop  "  term  indicating  that 
the  "  bucket  shop  "  has  actually  purchased  or  sold  a  given 
security  as  a  matter  of  protection.  (See  "  Bucket  Shop.") 

Pyramiding.  When  the  uninitiated  reads  in  his  newspapers 
that  "  they  are  pyramiding  the  stock  market  "  it  is  not  sur- 
prising that  he  doesn't  understand,  because  it  would  seem  that 
no  more  substantial  structure  is  known  to  engineers  than  a 
pyramid.  As  a  matter  of  fact,  its  use  in  stock  market  phrase- 
ology refers  to  a  dangerous  condition  of  affairs.  To  understand 


MONEY    AND    INVESTMENTS  321 

its  true  meaning  it  is  well  for  the  reader  to  be  possessed  of  a 
knowledge  of  marginal  transactions  (for  which  see  "  Margin"). 
In  the  boom  days  of  the  West,  in  some  of  the  rapidly  growing 
larger  cities,  the  value  of  real  estate  was  advancing  by  leaps 
and  bounds,  producing  a  very  unnatural  condition  of  affairs 
financially,  resulting,  for  instance,  in  a  man  purchasing  a 
piece  of  land  for  $5,000,  mortgaging  it  for  $3,000;  the  value 
of  the  land  would  advance  so  rapidly  that,  in  an  almost  in- 
credibly short  time,  a  new  mortgage  could  be  placed  on  it  for, 
say,  $5,000;  the  land  then  being  valued  at  $8,000  or  $9,000. 
The  difference  between  the  amounts  of  the  two  mortgages, 
namely,  $2,000,  being  used  by  the  owner  of  the  land  for  living 
expenses.  When  a  financial  collapse  came,  the  investor  who 
last  made  a  mortgage  upon  the  land  had  to  take  it  to  secure  his 
debt  and  the  land  owner  had  nothing.  There  was  what  is 
known  as  "  pyramiding  "  going  on.  The  same  thing  takes 
place  in  the  stock  market  when  one  is  buying  on  a  "  margin," 
and  the  stock  market  advance  is  so  fast  in  price,  that  he  can 
buy  additional  stock  with  the  increased  margin.  In  case  of  a 
sudden  drop  in  prices  the  person  so  "  pyramiding  "  his  stock 
is  found  underneath  the  cUbris,  unless  he  has  sufficient  out- 
side resources  to  protect  himself.  "  Pyramiding  "  is  not  the 
proper  title  at  all;  an  "  inverted  pyramid  "  is  what  is  really 
understood,  and  an  inverted  pyramid  is  a  very  dangerous 
proposition.  The  following  quotation  from  a  newspaper  shows 
the  true  applications: 

"  An  inverted  pyramid  is  not  a  nice  thing  to  sit  under  lest 
some  pressure  on  the  base,  now  the  top,  cause  it  to  topple." 

"  Pyramiding  the  market  "  is  like  building  a  structure  with 
an  enormous  top  resting  on  a  very  insecure  foundation. 

Pyx  Coins.  Coins  retained  for  testing  as  explained  under 
"  Trial  of  the  Pyx." 

P.  &  L.     Profit  and  Loss. 


Q.    Chicago,  Burlington  &  Quincy  Railway  Co. 

Qualified  Acceptance.     See  "  Acceptance." 

Qualified  Indorsement.  An  indorsement  with  the  addition 
of  the  words  "  without  recourse  "  (as  explained  under  that 
subject)  is  a  "  qualified  "  one.  Further  negotiation  is  not 
prevented  by  indorsement  of  this  kind,  but  the  indorser  is 
relieved  from  all  liability  for  payment. 

Quarter.  There  are  8  bushels,  or  480  pounds,  in  a  "  quar- 
ter "  of  wheat.  Also,  a  silver  coin  of  the  United  States,  con- 
taining 86.805  grains  of  fine  silver  and  9.645  grains  of  alloy, 


322  MONEY    AND    INVESTMENTS 

equivalent  to  one-quarter  of  a  dollar,  or  25  cents.     "  Legal 
tender  "  in  amounts  not  to  exceed  $10  in  any  one  payment. 

Quarter  Days.  January  1st,  April  1st,  July  1st,  and  October 
1st. 

Quarter  Eagle.  A  gold  coin  of  the  United  States  of  the 
value  of  $2.50,  containing  58.05  grains  of  fine  gold. 

Quarterly  Disbursements.  Although  interest,  dividends, 
etc.,  are  falling  due  daily,  yet  the  great  majority  of  payments 
of  this  kind  occur  about  January  and  July  1st  of  each  year, 
with  the  other  "  quarter  "  months  —  April  and  October  1st  — 
following  close  behind.  The  vast  sums  of  money  which  are 
needed  for  payments  —  "  disbursements  "  —  at  such  times 
compel  the  banking  institutions  to  accumulate  funds  to  meet 
the  same.  These  institutions  are  less  willing  to  make  loans 
just  previous  to  the  "  quarter  days  "  and  money  rates  are  apt 
to  advance;  money  commands  a  higher  rate  of  interest. 
Borrowers  of  money  recognize  this  fact  and  generally  try  to 
provide  in  advance  for  funds  to  tide  over  such  times.  When 
the  "  quarter  days  "  arrive,  and  the  banks,  trust  companies, 
etc.,  pay  out  the  money  called  for  by  dividends,  interest  due, 
etc.,  the  "  quarterly  disbursements  "  are  made,  and  frequently 
many  draw  sighs  of  relief  if  the  critical  point  is  weathered 
with  no  money  pinch  resulting. 

Quarterly  Interest.  Interest  payable  four  times  a  year.  If 
interest  on  a  bond  is  payable  January  1st,  the  three  next  cor- 
responding quarterly  periods  would  be  April,  July,  and  October 
1st.  The  interest  on  all  United  States  Government  bonds  is 
payable  quarterly,  but  not  on  the  majority  of  investments. 

Quarterly  Settlement-Days.  In  the  United  States,  January, 
April,  July,  and  October  1st.  Upon  these  days,  the  majority 
of  interest  payments  fall  due,  as  well  as  many  bonds  and 
other  obligations,  necessitating  large  disbursements  of  money. 

Quarterly  Settlements.    See  "  Quarterly  Disbursements." 

Quarter  Stock.  Shares  of  the  par  value  of  $25  each.  Many 
copper  stocks  have  such  a  face  value. 

Quasi-Municipal.  A  municipal  corporation  established  by 
law,  without  the  franchises  of  such  a  corporation  generally. 

The  laws  of  the  State  of  Maine  specifically  refer  to  a  "  quasi- 
municipal  "  corporation  in  regulating  the  investments  which 
a  savings  bank  may  make.  Mr.  F.  E.  Timberlake,  the  bank 
examiner  of  that  State,  interprets  a  "  quasi-municipal  cor- 
poration "  as  follows:  "  The  legislature  intended  by  that 
term  to  cover  municipal  corporations  created  for  a  special 
purpose,  not  having  general  municipal  powers  like  towns  and 
cities.  It  applies  to  Water  Districts,  like  Augusta  Water  Dis- 
trict, and  Gardiner  Water  District." 


MONEY    AND    INVESTMENTS  323 

Queen  and  Crescent  Route.  The  Cincinnati,  New  Orleans 
and  Texas  Pacific  Railway  Company.  (Lessee  of  the  Cin- 
cinnati Southern  Railway  Company.) 

Quick  Assets.  Anything  that  can  be  readily  converted  into 
cash  without  the  necessity  of  taking  a  prohibitive  loss. 
Government  bonds  are  always  considered  a  "  quick  asset;  " 
perhaps  the  quickest  of  assets  in  this  country,  as  in  the  most 
distressing  money  market  conditions  they  are  supposed  to  be 
convertible  into  cash  at  a  less  sacrifice  than  any  other  security 
under  like  conditions. 

Quick  Shipment.  A  Chicago  Board  of  Trade  term  calling 
for  shipment  within  five  business  days. 

Quid.  In  Great  Britain  this  is  a  slang  term  for  a  "  pound 
sterling." 

Quincy.     Quincy  Mining  Co.  (Copper.) 

Quit-Claim  Deed.    See  "  Deed." 

Qu.  Jan.  (or  Qu.  Feb.,  etc.).  Quarterly  beginning  with 
January,  or  with  whatever  month  is  named. 

Quotations.  Prices  at  which  commodities  or  securities  are 
sold,  or  prices  offered  or  bid  for  the  same,  or  prices  at  which 
they  are  offered  for  sale.  In  the  case  of  stock  exchange  "  quo- 
tations "  it  means  the  prices  at  which  securities  are  sold  on  the 
stock  exchange,  or  the  "  bid  "  or  "  asked  "  price  of  the  same. 
"  Quotations  "  of  stock  exchange  transactions  are  reported 
in  such  abbreviated  form,  that  a  few  suggestions  in  that 
regard  may  not  come  amiss.  All  stocks  are  "  common 
stocks  "  when  not  otherwise  designated.  "  U.  P."  means 
Union  Pacific  Railway  common  stock;  if  the  "  preferred  " 
is  meant,  "  U.  P.  Pref."  will  be  the  reading.  "  10  Sugar  120  " 
is  equivalent  to  10  shares  American  Sugar  Refining  Company 
common  stock  at  $120  per  share. 


R 

Ragged  Bond.  When  unmatured  coupons  have  been  cut 
from  a  bond  and  attached  to  it  again  by  a  pin,  or  some  such 
method,  the  security  is  termed  a  "  ragged  bond." 

Rag  Money.     "  Paper  money." 

Raid.  A  sudden  fall  in  prices  brought  about  by  the  efforts 
of  one  or  more  persons  desiring  to  attain  that  end. 

Railroad  Aid  Bonds.  Issued  by  municipalities  to  raise  funds 
in  order  to  give  financial  assistance  to  a  railroad.  This  is 
nothing  more  nor  less  than  a  "  subsidy  "  (refer  to  that  sub- 
ject) except  that,  in  order  to  give  the  assistance,  the  munici- 
pality finds  it  necessary  to  borrow  the  funds.  A  great  many 


324  MONEY    AND    INVESTMENTS 

bonds  of  this  nature  were  issued  by  the  Southern  and  Central 
States  during  the  period  immediately  following  the  Civil  War, 
and  a  great  many  of  these  issues  have  been  repudiated. 
"  Railroad  aid  bonds  "  are  a  questionable  investment,  as  well 
as  bonds  issued  in  aid  of  any  special  enterprise,  although  per- 
haps "  railroad  aid  bonds  "  have  stood  the  test  better  than 
similar  issues  marketed  to  give  assistance  to  manufacturing 
concerns.  This  recent  decision  in  one  of  the  Western  courts, 
bearing  upon  an  issue  of  "  manufacturing  aid  bonds,"  is 
pertinent  to  the  subject: 

"  The  benefit  resulting  to  the  local  public  of  a  town  by  the 
establishment  of  manufactories  is  not  different  in  kind  from 
the  benefit  to  such  public  arising  from  the  establishment  and 
operation  of  grocery  stores.  The  manufacturer,  the  merchant, 
the  mechanic,  and  the  labourer  are  equal  promoters  of  the  public 
good  and  equally  entitled  to  public  aid.  No  line  can  be  drawn 
in  favour  of  one  of  them  to  the  exclusion  of  the  others,  and  a 
recognition  of  the  right  thus  to  distribute  money  procured  by 
taxation  would  subject  the  municipalities  to  importunities 
and  impositions  innumerable." 

A  great  many  of  the  most  reputable  bond  houses  have  con- 
sistently refused  to  handle  any  bonds  issued  in  aid  of  railway 
or  other  private  enterprises. 

Railroad  Equipment  Companies.  Corporations  which  manu- 
facture rolling  stock  and  other  equipment  for  the  railroads. 
Some  of  the  most  important  are  the  American  Locomotive 
Co.,  the  American  Car  &  Foundry  Co.,  the  Pressed  Steel 
Car  Co.,  and  the  Railway  Steel-Spring  Co. 

Railroad  Securities.1  Probably  the  best  indication  of  exist- 
ing business  conditions  is  the  railroad  earnings;  they  reflect 
good  and  bad  periods  with  wonderful  precision.  They  are 
transporters,  not  producers  of  wealth.  The  prices  of  railroad 
stocks  and  bonds  follow  very  closely,  in  the  long  run,  the 
course  of  their  earnings. 

Without  railways,  the  wheels  of  progress  in  this  country 
would  come  almost  to  a  standstill.  There  is  hardly  any 
industry,  outside  of  agriculture,  which  means  so  much  to  the 
country  as  the  great  distributing  arteries,  the  railways.  The 
conservative  savings  bank  laws  relating  to  investments  in  the 

1  If  one  is  to  become  a  considerable  investor  or  dealer  in  railroad  securi- 
ties, an  enormous  amount  of  information  is  necessary,  which  can  but  be 
hinted  at  here.  There  are  many  books  which  bear  upon  the  subject,  such 
as,  "  The  Anatomy  of  a  Railroad  Report  "  by  Woodlock,  "  British  Railway 
Finance,"  by  Wall,  "  American  Railway  Transportation,"  by  Johnson, 
"  Poor's  Manual  of  Railroads,"  "  The  Manual  of  Statistics  Stock  Exchange 
Hand-Book,"  "  Moody's  Manual  of  Railroads  and  Corporation  Securities," 
and  "  White  &  Kemble's  Atlas  and  Digest  of  Railroad  Mortgages."  For 
weekly  or  daily  publications,  the  Commercial  and  Financial  Chronicle 
and  the  Watt  Street  Journal  will  prove  of  great  assistance. 


MONEY    AND    INVESTMENTS  325 

various  States  are  being  constantly  amended  to  permit  of 
the  purchase  of  additional  railway  issues,  recognizing  the 
soundness  of  this  class  of  securities.  As  soon  as  an  issue 
becomes  known  as  a  legal  investment  for  savings  banks,  say, 
in  New  York,  Connecticut,  or  Massachusetts,  such  an  issue 
advances  in  price,  making  the  net  return  to  the  investor 
much  less  than  previously.  There  are  many  high  grade 
railway  issues,  now  not  accepted  under  the  law  by  the  savings 
banks  of  the  large  Eastern  States,  which,  perforce,  must 
become  so  in  the  not  very  distant  future,  and  a  careful  selec- 
tion of  such  issues  to-day  may  offer  a  reasonable  chance  for  an 
enhancement  in  the  value  of  the  principal,  in  the  case  of  a 
long-time  bond. 

The  thought  of  any  serious  competition  to  the  large  trunk 
lines,  on  account  of  the  building  of  new  through  routes,  may 
practically  be  eliminated.  The  cost,  in  the  present  rapidly 
increasing  density  of  population,  of  obtaining  right  of  way 
for  the  construction  of  any  through  line  and  for  the  obtaining 
of  suitable  terminals  (In  this  connection  read  footnote  to 
"  Terminal  Company  Bonds.")  in  the  large  cities  would 
absolutely  prohibit  the  completion  of  such  a  route.  It 
would  be  unable  to  return  sufficient  interest  upon  the  invest- 
ment, owing  to  its  extraordinary  cost,  to  make  it  attractive. 
Therefore,  the  railroad  building  of  the  country,  from  now  on, 
must  be  very  largely  limited  to  the  building  in  the  more 
sparsely  settled  sections  and  to  branch  lines,  or  feeders,  to 
the  large  roads  already  in  existence. 

In  a  word,  the  best  rate  of  interest  return,  safety  con- 
sidered, probably  obtainable,  to-day,  in  practically  almost 
unlimited  amounts,  must  be  in  the  better  grade  railroad 
bonds,  and,  unless  these  roads  be  in  the  future  selfishly 
managed  or  overburdened  with  indebtedness  from  poor 
financiering,  there  seems  no  reasonable  doubt  as  to  the 
permanent  solvency  of  the  large  majority  of  such  corpora- 
tions. The  investor,  however,  must  be  brought  face  to 
face  with  the  intricate  problem  of  the  proper  selection  of  a 
railroad  bond,  and,  to  that  end,  must  not  be  misled  by  a  title 
which  a  railroad  issue  may  bear,  leading  one  to  think  that  it 
occupies  a  position,  as  regards  claim  upon  the  assets  of  the 
property,  closer  than  is  absolutely  the  fact.  Study  carefully 
each  bond  issue;  find  out  just  how  it  is  secured;  consider  the 
earning  ability  and  physical  condition  of  the  road  and  confine 
yourself  as  nearly  as  possible  to  the  issues  which  are  not  pre- 
ceded by  earlier  mortgages;  otherwise,  be  sure  that  there  is 
an  ample  margin  of  security  and  earning  capacity  over  the 
above  such  earlier  mortgages  to  protect  the  later  one  issued 
and  under  consideration.  Such  bond  issues  as  prior  liens, 
first  consolidated,  general  mortgage,  consolidated  mortgage, 


326  MONEY    AND    INVESTMENTS 

etc.,  may  all  be  misleading,  and  the  real  status  of  such  a 
mortgage  should  be  clearly  understood  before  purchase  is 
made. 

The  tremendous  expenditure  by  the  American  railroads  of 
to-day  for  improvements  is  necessitating  an  abnormal  increase 
in  the  capital  account,  i.  e.  new  securities.  The  question  may 
well  be  asked  if  the  net  earnings  will  permanently  increase  in 
proportion  to  the  increased  capitalization.  Such  has  not  been 
the  case  in  Great  Britain,  and  many  wise  financiers,  as  well  as 
practical  railroad  men,  believe  that  we  have  reached  our  limit 
in  the  increase  of  per  cent,  of  net  earnings  to  capitalization  in 
this  country.  This  argues  for  the  conservative  investor  to 
select  those  securities  which  have  the  earliest  claims  upon 
assets  and  earnings,  i.  e.  "  first  mortgage  bonds,"  to  illus- 
trate, "  preferred  "  rather  than  "  common  "  stocks,  etc. 

In  selecting  a  railroad  bond,  first  or  junior  issue,  the  selling 
price  of  the  stock  is  a  good  guide.  If  it  is,  and  has  been  for 
some  years,  quoted  at  a  good  premium,  and  can  show  a  good 
record  for  dividends  paid,  it  argues  for  safety  in  the  bonded 
capitalization. 

One  very  important  fact  to  ascertain  in  the  investigating 
of  any  railroad  company,  is  whether  or  no  it  is  keeping  up  its 
physical  condition  and  making  proper  expenditures  for  the 
same  directly  from  earnings.  The  tendency  of  recent  years  is 
to  run  much  heavier  rolling  stock  and  larger  train  loads, 
calling  for  heavier  rails,  more  substantial  bridges,  and  a 
reduction  of  sharp  grades  and  curves,  all  of  which  many  of  our 
better  roads  have  accomplished.  The  statement  has  been 
made  that  a  road  which  has  not  spent  at  least  $10,000  per 
mile  for  such  purpose  within  the  past  ten  years  is  behind  the 
times.  Roads  which  have  been  able  to  accomplish  this  with- 
out increasing  their  indebtedness  on  account  thereof  should 
be  considered,  everything  else  being  equal,  sound  financially. 

Compare  cost  of  operating  any  road  under  consideration 
with  that  of  other  companies  similarly  located,  and  form, 
thereby,  an  opinion  as  to  whether  or  not  the  particular  road 
is  being  economically  managed. 

The  management  of  a  railroad  property,  its  control,  class 
of  business  tributary  to  it,  its  competition,  or  the  likelihood 
of  competition,  the  importance  of  its  terminals,  must  all 
be  carefully  investigated.  The  large  agricultural  business 
tributary  to  the  Union  Pacific  system,  or  the  numerous  coal 
fields  which  pay  tribute  to  the  coal-carrying  roads,  are  factors 
of  undeniable  strength.  Some  short  railroad  which  may  in 
itself  originate  a  vast  freight  tonnage,  like  one  occupying 
a  strategic  position  in  a  mining  district  of  practically  a 
permanent  character,  may  be  a  very  sound  proposition, 
although  but  a  small  one. 


MONEY    AND    INVESTMENTS  327 

Ascertain  if  the  freight  rates,  expecially  if  it  is  a  railroad 
not  doing  an  interstate  business,  and  so  not  amenable  to  the 
railway  rate  law,  are  excessive.  A  road  may  have  such  a 
monopoly  that  it  may  be  charging  exorbitant  rates  and 
tempt  competition.  For  a  permanent,  prosperous  condition 
of  any  railroad  so  situated,  fair  passenger  and  freight  rates  are 
essential. 

Some  roads  may  be  so  clearly  dependent  upon  agricultural 
products  that  a  crop  failure  would  be  disastrous.  A  road  to 
be  a  one-crop  or  a  one-industry  road  must  be  based  on  the 
traffic  of  an  industry  of  a  fairly  permanent  character. 

The  earnings  of  a  railroad  under  construction  are  worthy  of 
careful  study.  For  the  purpose  of  illustration,  here  is  a  rail- 
road half  built;  it  is  operating,  but  at  the  same  time  the 
remaining  half  is  under  construction.  By  force  of  circum- 
stances most  of  the  material  used  for  this  purpose  is  hauled 
over  that  part  of  the  line  in  operation.  The  transportation 
of  this  is  not  in  any  sense  a  proper  earning  for  the  road,  al- 
though many  roads  take  credit  for  such  a  haul.  There  is  no 
objection  to  having  the  figures  show;  that  is,  the  actual  cost 
of  hauling  such  freight,  and  the  earnings  from  so  doing,  and 
possibly  it  may  be  legitimate  to  charge  against  the  construction 
of  the  new  part  of  the  road  the  cost  of  this  haul,  but  it  is 
decidedly  improper  to  allow  any  earnings  upon  this  haul  to 
be  used  as  an  argument  for  the  sale  of  the  bonds  by  the  swelling 
of  the  gross  and  net  income  of  the  property,  as  the  transpor- 
tation of  this  freight  cannot  be  a  permanent  factor.  This 
illegitimate  and  improper  method  of  bookkeeping  has  been 
adopted  at  times  in  the  past,  and  has  been  unfair  to  the 
investor. 

Railroad  managers  have  of  late  given  much  attention  to  the 
investment  basis  of  their  companies.  It  is  becoming  more  the 
custom  not  to  pay,  or  increase,  dividends,  until  the  per- 
manency of  the  rate  is  reasonably  assured.  The  paying  for 
improvements  out  of  earnings  is  a  very  good  feature,  and  is  so 
universal  that  it  is  estimated  that  our  whole  railroad  mileage 
earns  double  what  it  distributes  in  the  way  of  dividends. 

We  differ  somewhat  from  the  English  in  our  way  of  esti- 
mating the  intrinsic  value  of  a  railroad  issue,  and  this  is  partly 
due  to  their  custom  of  placing  irredeemable  debentures, 
while  we  put  out  bonds  with  a  definite  date  of  maturity. 
Even,  although  in  practice  our  issues  are  not  paid  when  due, 
but  refunded,  we,  nevertheless,  consider  what  the  value  of 
the  property  will  be  at  the  loan's  maturity.  In  England,  the 
irredeemable  feature  eliminates  that  factor  and  results  in  a 
careful  analysis  of  the  road's  earning  power,  so  that  the  in- 
terest rate  may  be  permanent,  as  in  the  case  of  a  stock.  And, 
perhaps,  they  are  following  the  truer  course,  for  the  value  of 


328  MONEY    AND    INVESTMENTS 

a  railroad  if  it  cannot  earn  its  charges  under  good  management 
and  normal  conditions,  is  doubtful  —  leaving  out  of  con- 
sideration the  possibility  that  some  other  company  may  buy 
it.  It  is  said  that  about  93%  of  the  railroad  capitalization  is 
invested  in  immovable  property. 

It  is  becoming  the  generally  accepted  opinion  among 
financiers  that  the  value  of  a  railroad  should  be  determined 
by  its  present  and  future  net  income. 

The  amount  of  money  invested  in  railroads  is  enormous. 
Wharton  Barker  estimates  the  present  capitalization  as  about 
$13,800,000,000,  but  of  this  he  figures  almost  $8,000,000,000 
as  fictitious  capital  on  which  "  the  railroads  take  from  the 
people  each  year  for  dividends  .  .  .  the  great  sum  of  $350,- 
000,000." l 

Rails.  The  expression  is  often  used,  for  instance,  "  Rails 
are  strong;  "  meaning  railway  stocks  are  advancing  in  price.2 

Railway  Trust  Bond.  Another  name  for  a  "  collateral  trust 
bond." 

Rail,  Weight  of.  It  is  customary  to  speak  of  a  50,  60,  or 
90,  etc.,  pound  rail.  This  means  the  weight  of  the  rail  per 
yard;  that  is,  a  "  90  Ib.  rail  "  weighs  90  pounds  for  each  three 
feet  in  length. 

Raised  Check.    See  "  Check." 

Rally.  A  term  used  in  the  stock  market  to  express  a  rise  in 
the  price  of  stocks  after  a  sudden  decline. 

Rand.  From  Witwatersrand,  meaning  White  Water  Range. 
As  used  in  relation  to  mining  and  investment  matters,  it  has 
reference  to  that  part  of  South  Africa  in  which -is  located  the 
important  gold  mines  of  that  section  of  the  world.  In  some- 
what the  same  sense  as  the  expression  "  Wall  Street,"  "  Rand  " 
has  rather  a  broader  meaning  than  a  mere  territorial  one,  in 
that  it  goes  a  bit  further  so  as  to  include  the  mines  themselves 
and,  in  some  instances,  the  people  associated  in  their  manage- 
ment. 

Ran  Off.     Prices  declined. 

Rapid  Transit.  A  short  name  for  Brooklyn  Rapid  Transit 
Co. 

Rate  of  Exchange.  Supposing  that  the  reader  understands 
"  exchange,"  then  the  "  rate  of  exchange  "  indicates  price 
of  the  money  of  one  country  as  reckoned  in  that  of  another. 

Rating.  This  may  be  understood  by  reading  "  Mercantile 
Agency."  "  Rating  "  is  the  financial  standing  or  credit  of  a 
person,  firm,  or  corporation. 

1  North  American  Review,  Oct.  19,  1906. 

2  This  term  perhaps  first  originated  in  about  1838  when  "  Yankee  rails  " 
were  first  traded  in  upon  the  London  market. 


MONEY    AND    INVESTMENTS  329 

RE.    The  "  ticker  "  abbreviation  for  "  real  estate." 

React.  Prices  may  "  react  "  after  an  advance.  To  "  re- 
act "  means  a  change  in  the  direction  of  prices  from  the  up- 
ward tendency  which  had  been  existing  up  to  the  time  of  such 
reaction. 

Reading.     Reading  Co.  (Railroad  and  Coal.) 

Readjustment.  By  reading  the  subject  "  Reorganization  " 
it  will  be  seen  that  that  refers  to  a  rearrangement  of  the 
capitalization  of  a  company  which  had  been  unable  to  meet 
its  obligations,  so  that  under  the  new  plan  better  results  may 
be  looked  for.  Proceedings  of  this  nature  are  generally  forced 
upon  the  company  by  its  creditors,  or  security  holders,  and 
the  property  put  through  "  foreclosure  proceedings."  A 
"  readjustment "  is  virtually  the  same  thing;  cause  and 
effect  being  the  same,  but  a  voluntary  proceeding  on  the  part 
of  the  security  holders,  and  customarily  without  foreclosure. 

Ready  Money.     At  hand  for  immediate  use. 

Real  Estate  Mortgage.  Mortgage  upon  real  estate,  and 
given  to  secure  a  debt  or  promise.  If  a  mortgage  is  given 
upon  land  it  usually  covers  all  improvements,  such  as  build- 
ings, etc.,  upon  the  same.  (For  further  information  see 
"  Mortgage  "  and  "  Real  Estate  Mortgage  Bonds.") 

Real  Estate  Mortgage  Bonds.  Naturally,  any  bonds  secured 
by  a  mortgage  upon  real  estate  would  come  under  this  title. 
An  example  of  such  a  bond  issued  by  a  corporation  is  that  of 
tne  Western  Union  Telegraph  Co.,  which  has  a  "  funding  and 
real  estate  mortgage  "  issue,  bearing  4^%  interest,  due  May, 
1950.  In  practice  such  a  bond  may  be  issued  by  a  corporation 
at  a  time  when  a  comparatively  small  amount  of  money  is 
needed,  when  it  would  not  be  necessary  for  its  proper  security 
to  mortgage  other  property  of  the  corporation,  there  being 
sufficient  real  estate,  such  as,  for  example,  lands,  and  build- 
ings thereon,  which  in  itself  would  be  ample  security  for  the 
bond  issue.  Such  property  may  be  mortgaged  to  especially 
secure  a  real  estate  issue  and  thus  raise  the  needed  money,  and 
leave  a  large  part  of  the  balance  of  the  corporation's  property 
free  from  that  particular  encumbrance. 

Real  Estate  Trust.  Common  in  Massachusetts.  A  voluntary 
association  —  not  an  incorporated  company  —  managed  by 
trustees  in  whom  is  vested  the  ownership  of  real  estate  held 
for  investment  purposes,  for  the  benefit  of  a  number  of  people 
jointly.  Real  estate  cannot  be  held  in  Massachusetts  by  an 
incorporated  company  organized  under  its  general  laws  for 
investment  purposes;  only  for  business  needs.  Certificates 
showing  ownership  are  usually  issued  to  the  investors  by  the 
trustees. 

Realize.     To  convert  into  cash;    sell;    take  one's  profits. 


330  MONEY    AND    INVESTMENTS 

Those  who  are  "  short  "  (see  "  Selling  Short  ")  may  buy  in  — 
"  cover  "  —  in  order  to  obtain  their  profits  or  meet  their  con- 
tracts. 

"  There  was  a  good  deal  of  realizing  to-day;  "  meaning  that 
there  had  been  much  selling  of  securities  with  the  idea  of 
taking  advantage  of  the  opportunity  to  make  profits. 

Real  Money.  Financiers  use  this  term  to  designate  metallic 
money  —  gold  or  silver,  according  to  the  "  standard  "  of  the 
particular  country  —  from,  usually,  paper  money,  which 
is  called  "  representative  money."  The  latter  has  no  real 
value,  but  only  represents  money  which  has,  and  which  it 
promises  to  give  in  exchange  when  demanded. 

Real  Property.  Land  and  buildings,  including  everything, 
such  as  minerals,  etc.,  below  the  surface,  and  the  air  or  space 
above;  also,  all  crops,  as  grass,  trees,  etc.,  which  are  not  con- 
sidered as  of  annual  planting.  The  right  to  use  other  land, 
as  by  a  right  of  way,  also  comes  under  this  head. 

Real  Valuation.    See  "  Assessed  Valuation." 

Rebate.  Paying  back.  Example:  If  one  borrows  money 
and  pays  interest  for  six  months  in  advance,  and  then  at  the 
end  of  three  months  —  by  the  consent  of  the  lender  —  pays 
the  debt  and  receives  back  the  interest  for  the  remaining  three 
months,  the  lender  "  rebates  "  the  interest. 

A  "  rebate  "  on  the  part  of  a  "  common  carrier  "  is  a  return 
of  money  to  the  shipper,  or  the  granting  to  him  of  some 
privilege,  so  that  he  may  receive,  in  effect,  a  more  favourable 
shipping  rate  than  the  regular  tariff. 

Recede.  "  A  receding  market;  "  slow  but  steady  shrinkage 
in  prices. 

Receiver.  One  appointed  by  a  court  to  take  the  custody, 
management,  or  disposal  of  property  in  controversy,  pending 
litigation.  One  appointed  to  close  up  the  affairs  of  an  in- 
solvent concern,  by  dividing  the  assets  among  those  entitled 
to  receive  same. 

Receivers'  Certificates.  A  form  of  indebtedness  issued  by 
authority  of  the  court  against  property  under  the  manage- 
ment of  a  receiver,  for  the  purpose  of  borrowing  money. 
These  certificates  take  precedence  over  all  other  indebtedness 
of  the  company,  even  over  a  first  mortgage,  —  except  money 
due  for  wages  and  other  necessary  operating  expenses,  —  and 
must  be  first  paid.  "  Receivers'  certificates  "  are  usually 
sanctioned  by  the  court  only  to  defray  necessary  expenses  for 
the  continued  operation  of  a  corporation,  the  ceasing  of  which 
would  be  a  public  calamity;  such  as  a  railroad,  lighting  plant, 
etc. 

Receiving  Teller.  See  "  Teller."  Also  called  the  "  Second 
Teller." 


MONEY    AND    INVESTMENTS  331 

Reconstruction.  This  term  is  used  in  Great  Britain  as  the 
equivalent  of  our  "  reorganization." 

Recourse.  Literally:  running  back;  a  return.  To  have 
"  recourse  "  is  to  have  legal  right  to  demand  payment.  The 
holder  of  a  check  which  is  not  paid  when  presented  at  the 
bank  would  have  "  recourse  "  against  the  indorsers;  that  is, 
could  demand  payment  from  any  of  them. 

Recovery.    An  advance,  after  a  decline  in  prices. 

Red.    "  In  the  Red."  (See  "  Profit  and  Loss.") 

Redeemable.    Same  as  "  callable." 

Redemption  Agent.    Same  as  "  clearing-house  agent." 

Redemption  Bonds.  Issued  to  redeem  —  pay  off  —  other 
bonds  which  are  due  or  which  the  company  or  municipality 
has  the  right  to  prepay  before  maturity.  Same  as  "  Refunding 
Bond." 

Redemption  Fund.  If  the  reader  will  turn  to  the  subject 
"  Financial  Bill  "  he  will  find  therein  referred  to  the  Act  of 
Congress  of  March  14,  1900,  otherwise  known  as  the  "  Gold 
Standard  Act."  This  Act  further  provides  as  follows: 

"  Sec.  2.  That  United  States  notes,  and  Treasury  notes 
issued  under  the  Act  of  July  fourteenth,  eighteen  hundred  and 
ninety,  when  presented  to  the  Treasury  for  redemption,  shall 
be  redeemed  in  gold  coin  of  the  standard  fixed  in  the  first 
section  of  this  Act,  and  in  order  to  secure  the  prompt  and 
certain  redemption  of  such  notes  as  herein  provided  it  shall 
be  the  duty  of  the  Secretary  of  the  Treasury  to  set  apart  in 
the  Treasury  a  reserve  fund  of  one  hundred  and  fifty  million 
dollars  in  gold  coin  and  bullion,  which  fund  shall  be  used  for 
such  redemption  purposes  only,  and  whenever  and  as  often 
as  any  of  said  notes  shall  be  redeemed  from  said  fund  it  shall 
be  the  duty  of  the  Secretary  of  the  Treasury  to  use  said  notes 
so  redeemed  to  restore  and  maintain  such  reserve  fund  in 
the  manner  following,  to  wit:  First,  by  exchanging  the  notes 
so  redeemed  for  any  gold  coin  in  the  general  fund  of  the 
Treasury;  second,  by  accepting  deposits  of  gold  coin  at  the 
Treasury  or  at  any  sub-treasury  in  exchange  for  the  United 
States  notes  so  redeemed;  third,  by  procuring  gold  coin  by  the 
use  of  said  notes,  in  accordance  with  the  provisions  of  section 
thirty-seven  hundred  of  the  Revised  Statutes  of  the  United 
States." 

If  the  Secretary  of  the  Treasury  is  unable  to  restore  or 
maintain  the  reserve  fund  by  the  foregoing  methods,  and  the 
amount  of  the  gold  coin  and  bullion  shall  fall  below  $100,000,- 
000,  then  he  is  authorized  to  restore  the  same  by  issuing 
United  States  bonds  therefor,  but  to  sell  the  same  only  in 
exchange  for  gold. 


332  MONEY    AND    INVESTMENTS 

Re-Discounts.  It  being  understood  that  when  a  note  is 
"  discounted  "  that  the  interest  upon  the  same  is  deducted 
by  the  lender  from  the  amount  loaned,  it  must  be  clear  that 
"  re-discounting  "  is  the  act  on  the  part  of  the  holder  of  a 
"  discounted  note  "  of  negotiating  the  same;  that  is,  he 
again  "  discounts  "  it;  i.  e.  "  re-discounts  "  it.  Of  course 
he  must  indorse  if  drawn  so  as  to  require  it. 

This  is  a  very  common  practice  among  banks  which  have 
not  sufficient  cash  available  for  their  needs  and,  for  the 
purpose  of  obtaining  the  same,  "  re-discount  "  notes  which 
they  hold. 

The  method  of  borrowing  between  banks  may  not  be 
strictly  a  "  re-discount."  The  country  bank,  for  illustration, 
may  simply  make  an  over-draft  on  its  city  depository.  Or 
it  may  take  "  discounted  paper  "  of  its  own  and  deposit  it  as 
collateral  with  its  city  depository  together  with  its  own  note 
as  an  evidence  of  indebtedness.  Still  another  way  is  to  bor- 
row on  its  own  "  certificate  of  deposit." 

Refining.    The  elimination  from  bullion  of  all  base  metals. 

Refunding.  Issuing  a  new  lot  of  bonds  to  take  the  place  of 
those  falling  due,  and  which  for  inability,  or  other  reasons, 
the  corporation  or  municipality  is  not  to  pay  off  in  cash. 
Suppose,  for  example,  a  city  has  some  bonds  maturing  which 
were  previously  issued  for  "  Water  Works;  "  the  city  brings 
out  a  new  issue  to  replace  it;  this  new  issue  ought  to  be  called 
"  Refunding  Water,"  it  may,  however,  be  called  simply 
"  Refunding." 

It  is  always  advisable  to  ascertain  the  nature  of  the  debt 
being  "  refunded  "  and  to  assure  oneself  that  it  was  originally 
contracted  for  a  proper  purpose.  This  is  one  reason  why  it  is 
well  that  the  name  be  specifically  set  forth  in  the  bond,  as 
above  suggested.  It  is  desirable  that  the  attorney  examining 
into  the  legality  of  a  "  refunding "  issue  should  likewise 
investigate  the  legal  status  of  the  old  debt. 

Refunding  First  Mortgage  Bond.  See  "  First  Refunding 
Mortgage  Bond."  The  two  titles  are  quite  distinct  in  their 
meaning. 

REG.  The  "  ticker  "  and  general  abbreviation  for  "  regis- 
tered." 

Registered  Bond.  (Read  first  "  Coupon  Bond.")  "  Regis- 
tered bonds  "  are  of  two  forms:  First,  registered  as  to  princi- 
pal and  interest  both;  second,  registered  as  to  principal  alone. 

A  "  registered  bond  "  has  the  name  of  the  owner  filled  out 
on  its  face,  but  cannot  be  transferred  from  one  person  to  an- 
other without  indorsement  upon  the  back  by  the  party  in 
whose  name  it  is  registered  and  sending  to  some  designated 
office  or  municipality  for  transfer;  the  same  as  a  share  of 


MONEY    AND    INVESTMENTS  333 

stock.  A  new  bond  will  be  issued  to  the  holder  and  made  out 
in  his  or  her  name.  There  is  no  objection  to  a  "  transfer  in 
blank  "  (to  which  subject  refer)  and  passing  the  bond  from 
hand  to  hand,  by  which  plan  any  holder  may  fill  in  his  or 
any  name  upon  the  back  in  the  transfer  blank  and  forward  to 
be  transferred  at  his  leisure.  But  as  the  ownership  of  a  bond 
is,  as  far  as  the  corporation  or  municipality  is  concerned, 
the  last  registered  holder  thereof,  it  is  to  such  holders  that 
checks  for  interest  are  mailed,  and  in  accepting  a  "  registered 
bond  "  "  transferred  in  blank  "  a  transfer  of  the  same  should 
be  made  upon  the  books  in  time  to  permit  the  rightful  owner 
to  receive  the  next  maturing  interest. 

In  the  first  case  above  mentioned  the  bond  bears  no  interest 
coupons,  but  the  interest  is  mailed,  as  it  matures,  directly 
to  the  holder,  in  the  form  of  a  check,  but  the  principal  sum 
must  be  collected  by  proper  indorsement  upon  the  back  and 
presentation  to  the  proper  authority. 

In  the  second  case:  a  bond  registered  as  to  principal  only. 
There  are  coupons  attached,  the  same  as  in  the  ordinary 
"  coupon  bond,"  which  are  collected  in  the  usual  manner  of 
coupons,  but  the  principal  sum  of  the  bond  itself  is  registered, 
and  to  be  collected  must  be  indorsed  and  forwarded  to  the 
proper  authority. 

The  reason  for  registration  is  primarily  for  safety,  for 
should  there  occur  a  theft  or  loss  a  "  registered  bond  "  can 
be  of  no  value  to  any  one  else.  There  is  much  inconvenience 
about  a  "  registered  bond  "  in  case  of  its  sale.  Most  bonds 
are  in  coupon  form. 

Registered  Coupon  Bond.  A  bond  described  under  "  regis- 
tered bond."  The  principal  alone  is  registered,  the  coupons 
being  payable  to  bearer,  and  the  interest  collected  by  de- 
taching and  presenting  the  same  for  payment.  The  interest 
on  the  ordinary  "  registered  bond  "  is  remitted  to  the  regis- 
tered holder  by  check. 

Registered  Letters  (and  Parcels).  Inasmuch  as  the  ship- 
ment of  coupons,  investment  securities,  or  other  valuable 
papers  is  a  very  common  factor,  it  seems  desirable  that  no 
mistake  should  be  made  in  the  use  of  the  mails  in  that  way. 
An  extract  from  the  post-office  laws  touching  upon  that  sub- 
ject here  follows: 

"  Registered  mails  reach  every  post-office  in  the  world. 

"  In  case  of  loss,  the  sender  or  owner  of  a  registered  article 
prepaid  at  the  letter  rate  of  postage,  mailed  at,  and  addressed 
to,  a  United  States  post-office,  is  indemnified  for  its  value  up 
to  $25. 

"  No  indemnity  is  paid  by  the  United  States  for  the  loss  in 
the  mails  of  registered  letters  or  parcels  addressed  to  any  for- 
eign country. 


334  MONEY   AND  INVESTMENTS 

"  The  registry  fee  is  8  cents  for  each  separate  letter  or 
parcel,  in  addition  to  the  postage,  both  to  be  fully  prepaid 
with  postage  stamps  attached  to  the  letter  or  parcel. 

"  Letters  and  parcels  (except  Parcels-Post  packages  for 
Great  Britain  and  Barbadoes)  addressed  to  foreign  countries, 
if  admissible  to  the  Postal  Union  mails,  may  be  registered 
under  the  same  conditions  as  those  addressed  to  domestic 
destinations.  The  registry  fee  in  every  case  is  eight  (8)  cents 
in  addition  to  law  ul  postage,  and  both  must  be  fully  prepaid. 

"  Any  piece  of  mailable  matter  may  be  registered  at  any 
post-office  or  station  thereof,  and  by  any  rural  free  delivery 
carrier.  In  residential  districts  of  cities,  letters  and  packages 
of  first  class  matter  that  are  not  cumbersome  on  account  of 
sizes,  shape,  or  weight  can  be  registered  by  letter  carriers  at 
the  house  door  as  safely  as  if  brought  to  the  post-office. 

"In  order  to  have  a  letter  or  parcel  registered,  it  is  neces- 
sary merely  to  have  it  properly  prepared,  addressed,  and 
stamped,  and  the  name  and  address  of  the  sender  written, 
stamped,  or  printed  on  it.  It  should  be  handed  to  the  post- 
master, clerk,  or  carrier,  who  will  write  out  a  registration  re- 
ceipt for  the  sender. 

"  Letters  or  parcels  intended  to  be  sent  in  the  registered 
mails  should  not  be  placed  in  street  letter  boxes  or  in  the 
ordinary  mail  drops  at  the  post-office.  They  must  be  pre- 
sented to  the  postmaster,  registry  clerk,  or  carrier. 

"  A  receipt  is  given  to  the  sender  for  every  piece  registered. 

"  A  second  receipt  from  the  addressee  or  his  authorized 
agent,  acknowledging  delivery,  is  returned  to  the  sender  in 
every  case  without  extra  charge.  This  receipt  is,  under  the 
law,  prima  facie  evidence  of  delivery. 

"  If  the  article  is  addressed  to  a  foreign  country  no  receipt 
from  the  addressee  is  returned  to  the  sender  unless  the  words 
'  Return  Receipt  Demanded  '  are  written,  stamped  or  printed 
across  the  face  of  the  letter  or  parcel. 

"  In  case  of  loss  of  a  registered  letter  (or  package  prepaid  at 
the  letter  rate)  the  sender  should  make  application  for  in- 
demnity to  the  postmaster  at  the  office  where  the  piece  was 
mailed.  The  postmaster  will  furnish  a  blank  form  for  that 
purpose. 

"  Registered  mail  is  deliverable  only  to  the  addressee  or 
upon  his  written  order,  or  to  the  person  in  whose  care  it  is 
addressed.  The  sender  may,  however,  restrict  delivery  to 
the  addressee  in  person  by  indorsing  upon  the  envelope  or 
wrapper  the  words  '  Deliver  to  addressee  only.'  The  words 
'  Personal '  or  '  Private  '  do  not  so  restrict  delivery.  Persons 
applying  for  registered  mail,  if  unknown,  will  be  required  to 
prove  their  identity. 

"  Registered  mail  will  be  forwarded  upon  the  written  or 


MONEY    AND    INVESTMENTS  335 

telegraphic  order  of  the  addressee  —  first-class  matter  im- 
mediately and  without  extra  charge;  other  matter  upon 
prepayment  of  the  postage  chargeable  by  law  for  forwarding. 
No  additional  registry  fee  is  chargeable  for  forwarding  or 
returning  registered  matter. 

"  When  the  sender  of  registered  mail  desires  to  reclaim  or 
recall  it,  at  any  time  before  its  delivery,  application  for  this 
purpose  must  be  made  to  the  mailing  postmaster." 

Registered  Stock.  This  differs  from  the  ordinary  stock,  as 
a  certificate  of  the  former  cannot  be  transferred  without  the 
signature  of  the  owner  (or  one  authorized  to  sign  for  him) 
being  placed  upon  the  books  of  the  company,  in  which  it 
represents  ownership,  and  the  delivery  of  the  certificate. 

Regular  (or  Regular  Way).  According  to  the  New  York 
Stock  Exchange  Rules,  delivery  of  the  security  before  a 
certain  fixed  hour  (2.15  P.  M.)  upon  the  first  business  day 
following  the  making  of  the  contract.  Regular  sales  made  on 
Friday,  however,  go  over  until  Monday  before  delivery. 

Regular  Dividend.    See  "  Dividend,  Extra." 

Reich-Marks.  As  referred  to  in  "  foreign  exchange " 
transactions,  exchange  on  Germany  is  understood.  (See 
"  Mark.") 

Reis.    See  "  Milreis." 

Reischbank.    See  "  Bank  of  Germany." 

Release  of  Mortgage.  When  the  holder  of  a  mortgage  has 
received  payment  for  the  debt,  or  satisfaction  of  the  other 
obligations  or  conditions  which  the  mortgage  was  given  to 
secure,  it  is  not  sufficient  that  he  should  simply  relinquish 
possession  of  the  papers  evidencing  the  security,  but  must 
execute  and  sign  a  "  release  of  mortgage,"  as  it  is  called,  which 
the  debtor  —  mortgagor  —  sends  to  the  office  of  Register  of 
Deeds  and  has  recorded.  This  shows  a  discharge  of  the  obliga- 
tion and  that  the  property  is  no  longer  encumbered  with  the 
mortgage. 

Blank  forms  of  release  may  be  obtained  at  many  stationers 
for  the  particular  State  in  which  they  are  desired  for  use. 

Remainder-Man.  The  one  to  whom  an  estate  goes  after  a 
certain  estate  is  determined. 

Re-margin.    To  give  more  "  margin."     (See  that  subject.) 

Remedy  Allowance.  This  is  a  variation  allowed  to  the 
English  mint  from  the  specified  standard  of  weight  and  fine- 
ness. As  an  example,  the  standard  of  fineness  of  the  English 
sovereign  is  ll-12th  fine  gold  and  l-12th  alloy;  with  a  total 
weight  of  123.27447  imperial  grains.  A  variation  from  this 
is  allowed  of  .20  imperial  grains.  That  is,  the  weight  of  fine 
gold  in  the  English  sovereign  must  not  vary  more  than 


336  MONEY    AND    INVESTMENTS 

2-10th  of  a  grain  from  ll-12th  of  the  total  weight  above 
given. 

In  America,  we  call  this  legal  variation  which  is  allowed 
by  our  coinage  laws,  the  "  Remedy  of  the  Mint." 

Remedy  of  the  Mint.    See  last  subject. 

Remit.  To  transmit  money  or  its  equivalent.  A  "  remit- 
tance "  is  the  act  of  transmitting  money  —  bills  or  the  like  — 
to  some  person  at  a  distance. 

Remittance  of  Money.    See  "  Shipment  of  Money." 

Renewal.  A  "  renewal  of  a  loan  "  is  to  extend  it  after  it 
matures. 

Renewal  Bonds.  Created  to  extend  an  issue  due;  same  as 
"  refunding  bonds." 

Rent-Charge  Stocks.  An  English  term  much  the  same  in 
meaning  as  our  guaranteed  (leased  lines)  railroad  stocks. 

Rentes.  Usually  the  Government  bonds  of  France.  The 
total  debt  of  France  amounted,  in  1905,  to  $5  878,822,695, 
of  which  $5,005,246,780  was  held  principally  by  the  industrial 
classes.1  It  was  the  largest  of  existing  debts,  with  Russia  next. 

Reorganization.  Rearrangement  of  the  financial  plan  or 
capitalization  of  a  corporation  which  has  been  unable  to  meet 
its  obligations  at  maturity,  so  that  interest  and  dividends 
may  be  earned  and  paid.  New  management  may  be  needed 
and  possible  changes  in  the  physical  condition  of  the  property. 
(See  "  Readjustment.") 

Reorganization  Committee.  By  reading  the  last  subject  it 
will  be  understood  that  the  working  out  of  a  new  system 
of.  capitalization  for  a  corporation  in  financial  difficulties  must 
be  placed  in  the  hands  of  some  persons  competent  to  deal 
with  the  same.  It  is  the  custom  for  the  security  holders  to 
select  a  number  of  men  for  this  purpose,  which  are  known  as 
the  "  reorganization  committee,"  and  who  are  often  given 
broad  powers,  the  securities  being  deposited  with  some  trust 
company  under  a  plan  of  reorganization,  which  may  be  called 
a  bondholders'  or  stockholders'  agreement,  or  designated 
by  some  such  title. 

Representative  Money.    Explained  under  "  Real  Money." 

Repudiate.  To  refuse  to  pay  a  debt;  to  dishonour  one's 
obligation  or  promise. 

Required  Reserve.  (As  used  in  the  "  Bank  Statement.") 
See  "  Reserve." 

Reserve.  All  national  banks  in  New  York,  Chicago,  and 
St.  Louis  —  which  are  known  as  "  central  reserve  cities  " 
—  are  required,  by  law,  to  have  on  hand  at  all  times  in  lawful 

1  J.  Martin  Miller,  United  States  Consul  at  Rheims. 


MONEY    AND    INVESTMENTS  337 

money  of  the  United  States  an  amount  equal  at  least  to  25% 
of  the  aggregate  of  their  deposits  in  all  respects.  This  is 
called  "  reserve."  1  National  banks  in  thirty-nine  other 
prominent  cities,  which  are  known  as  "  reserve  cities,"  while 
compelled  to  maintain  this  25%,  are  permitted  to  deposit 
one-half  of  the  amount  with  national  banks  in  the  "  central 
reserve  cities."  All  national  banks  in  the  United  States, 
other  than  those  located  in  "  central  reserve  cities  "  or  "  re- 
serve cities,"  but  known  as  country  banks,  must  maintain 
a  "  reserve"  of  15%  of  their  deposits;  but  of  this  amount 
they  may  keep  three-fifths  on  deposit  in  either  the  "  reserve  " 
or  "  central  reserve  cities." 

On  Sept.  29,  1902,  the  Secretary  of  the  Treasury  made  a 
ruling  permitting  national  banks  to  forego  the  necessity 
of  maintaining  a  25%  "  reserve  "  against  deposits  of  public 
money  secured  by  Government  bonds.  (See  "  United  States 
Depository.")  As  a  result,  the  weekly  statement  of  the  New 
York  Clearing-House  Association  banks  now  shows  this  25% 
figured  both  ways:  the  public  money  considered  as  any  other 
deposit,  and,  again,  in  accordance  with  the  Department  ruling. 
The  banks  have,  nevertheless,  maintained  "  reserves  "  against 
Government  deposits  to  this  day. 

The  "  reserve  "  of  the  Bank  of  England  is  explained  under 
the  last  part  of  "  Bank  of  England  Statement." 

The  difficulty  of  making  clear  this  term  as  used  among  those 
in  the  business  of  life  insurance  is  demonstrated  by  the  follow- 
ing extract  from  a  letter  from  a  well-known  life  insurance 
official:  "  It  is  not  as  easy  as  one  might  think  to  give  a 
definition  of  the  word  '  reserve,'  as  used  in  the  life  offices, 
that  will  be  immediately  recognized  by  the  layman.  Even 
actuaries,  when  they  come  to  an  analysis,  dispute  on  the 
definition." 

The  writer  has  obtained  no  less  than  seven  distinct  and 
varying  definitions  for  this  term,  two  of  which  are  given 
below: 

"  A  sinking  fund  computed  each  year  to  be  held  in  possession 
by  the  life  insurance  company  in  well  invested  assets  at  a 
given  rate  of  interest  to  make  good,  with  expected  premiums, 
each  contract  at  maturity." 

"  The  reserve  is  the  excess  amount  charged  in  the  early 
years  of  '  level  premium  policies  '  to  offset  the  failure  to  in- 
crease the  premium  during  the  later  years.  This  reserve  is 
invested  by  the  company,  and  the  proceeds  from  it  make  up 
the  deficiencies  in  the  later  premium  payments."  2 

Reserve  Agent.  A  bank  located  in  either  a  "  central  re- 
serve city  "  or  a  "  reserve  city,"  which,  with  the  approval 

1  See  footnote  to  "  Central  Reserve  Cities." 
1  World's  Work,  April,  1906. 


338  MONEY    AND    INVESTMENTS 

of  the  Comptroller  of  the  Currency,  may  be  selected  as  a 
depository  in  which  banks  in  other  cities  may  keep  a  portion 
of  their  "  reserve." 

Banks  in  "  central  reserve  cities  "  may  act  as  "  reserve 
agents  "  for  banks  located  in  either  "  reserve  "  or  "  undesig- 
nated  cities;  "  banks  located  in  "  reserve  cities  "  only  for 
those  in  "  undesignated  cities."  (Refer  to  the  subjects  in 
quotations.) 

Reserve  Banks.  National  banks  located  in  "  reserve 
cities."  (See  subject  in  quotations;  also  "  Central  Reserve 
Banks.") 

Reserve  Cities.  Certain  large  cities  in  the  United  States 
in  which  the  national  banks  shall  at  all  times  have  on  hand, 
in  "  lawful  money  "  of  the  United  States,  an  amount  equal 
to  at  least  twenty-five  per  centum  of  the  aggregate  amount 
of  its  deposits  in  all  respects."  1  All  such  banks,  with  the 
exception  of  "  National  Gold  Banks,"  may  keep  one-half  of 
their  lawful  money  reserve  in  cash  deposits  in  a  bank  in  a 
"  central  reserve  city  "  which  has  the  approval  of  the  Comp- 
troller of  the  Currency  as  their  reserve  agent. 

"  Reserve  cities  "  are  for  the  purpose  of  furnishing  large 
centres  in  which  country  banks  may  deposit  part  of  their 
funds  for  the  convenience  of  being  able  to  draw  checks  on  a 
larger  money  centre  and  on  Jan.  2,  1907,  were  as  follows: 

Boston,  Albany,  Brooklyn,  Philadelphia,  Pittsburg,  Balti- 
more, Washington,  D.  C.,  Savannah,  New  Orleans,  Louisville, 
Dallas,  Forth  Worth,  Houston,  Galveston,  Waco,  San  An- 
tonio, Seattle,  Cincinnati,  Cleveland,  Columbus,  Indianapolis, 
Detroit,  Milwaukee,  Cedar  Rapids,  Des  Moines,  Dubuque,  St. 
Paul,  Minneapolis,  Kansas  City,  Kan.,  Wichita,  Kansas  City, 
Mo.,  St.  Joseph,  Lincoln,  Omaha,  Denver,  Salt  Lake  City, 
San  Francisco,  Los  Angeles,  Portland,  Ore.2 

Banks  in  these  cities  may  be  selected  as  "  reserve  agents  " 
for  "  country  banks." 

Reserve  Excess.    Meaning  the  same  as  "  Surplus  Reserve." 

Reserve  Fund.    The  English  equivalent  of  our  "  surplus." 

Reserve  Held.  As  used  in  the  "  bank  statement  "  this 
indicates  the  amount  of  "  reserve  "  (see  that  subject)  as 
actually  held  by  the  banks,  without  regard  to  the  legal  re- 
quirements. 

Reserve  on  all  Deposits.  This  is  explained  under  "  New 
Reserve." 

Reserve  on  Deposits  Other  Than  United  States.  This  is 
explained  under  "  New  Reserve." 

1  See  footnote  to  "  Central  Reserve  Cities." 

2  Above  list  furnished  by  the  Treasury  Department  in  Washington. 


MONEY    AND    INVESTMENTS  339 

Resources.  Property  of  all  kinds;  everything  owned;  cash 
on  hand,  notes  and  bills  receivable,  merchandise;  in  fact 
everything  that  one  possesses,  including  what  is  due  him. 

Respondentia.  A  loan  on  the  cargo  of  a  vessel,  payment 
being  contingent  on  the  safe  arrival  of  the  cargo  at  the  port  of 
destination  —  the  effect  of  such  condition  being  to  except 
the  contract  from  the  common  usury  laws. 

Rest.  Surplus  or  undivided  profits;  the  accumulated  and 
undivided  profits  of  the  "  Bank  of  England  "  are  its  "  rest." 
With  us  "  surplus  "  is  the  term  commonly  used. 

Restrictive  Indorsement.  Sometimes  the  indorser  of  an  in- 
strument may  wish  to  prevent  its  further  negotiability,  and 
attaches  some  words  to  his  indorsement  to  that  effect.  This 
is  a  "  restrictive  indorsement."  Examples,  "  For  collection  " 
or  "  for  account  of,"  or  "  pay  to  James  Frazer  only." 

Resumption  of  Specie  Payment.  First,  read  "  Suspension 
of  Specie  Payment."  On  Jan.  14,  1875,  what  was  known  as 
the  Resumption  Act  was  approved,  by  which  the  Secretary 
of  the  Treasury  was  directed  to  make  provision  for  the  re- 
demption of  United  States  notes,  or  "  greenbacks,"  in  coin, 
beginning  with  Jan.  1st,  1879,  and  further  authorized  him 
to  use  surplus  revenues,  as  well  as  to  sell  bonds  at  not  less 
than  par  in  coin,  for  that  purpose. 

Retreating  Market.     Prices  declining. 

Return.  We  speak  in  this  country  of  the  "  Bank  State- 
ment." Abroad  "  return  "  is  used  as  the  equivalent  to  our 
"  statement."  For  example,  "  Return  of  the  Bank  of  Eng- 
land." 

Revenue  Bonds.  A  temporary  debt  created  for  the  purpose 
of  raising  funds  for  current  expenses,  and  in  anticipation  of 
the  collection  of  taxes.  Such  a  debt,  however,  is  usually  in 
the  form  of  notes. 

Rhode  Island.  Rhode  Island  Copper  Co.  There  are  also 
the  R.  I.  Perkins  Horse  Shoe  Co.,  and  the  R.  I.  Securities  Co. 
(street  railways.) 

Ribs.    Refer  to  "  Short  Ribs." 

Rich  Man's  Panic.  The  meaning  of  the  word  "  panic  " 
being  understood,  which  will  be  found  explained  under  that 
subject,  it  will  be  an  easy  matter  to  comprehend  that  "  rich 
men's  panics  "  are  sudden  declines  in  stock  market  values 
brought  about  by  the  wealthy  speculators  and  operators 
suddenly  trying  to  convert  their  holdings  into  cash,  resulting 
in  injury  to  themselves  rather  than  to  the  small  speculator  or 
trader. 

Rigged.  A  term  which  has  about  the  same  meaning  as  "  ma- 
nipulated." When  the  stock  market  has  been  "  rigged"  it  is 


340  MONEY    AND    INVESTMENTS 

understood  that  events  have  been  made  to  transpire  in 
accordance  with  the  wishes  of  those  powerful  enough  to 
effect  such  results.  A  trap  is  rigged  to  catch  the  unwary 
animal;  the  market  is  rigged  to  catch  the  unwary  speculator 
or  investor. 

Right  Price.  First  understand  "  Options."  In  London  it  is 
usual  to  refer  to  the  ordinary  market  price  for  a  forward  bar- 
gain in  firm  stocks  as  the  "  right  price  "  for  the  period  in 
question.1 

Rights.  When  a  corporation  has  occasion  to  bring  out  a 
new  stock  issue,  the  privilege  may  be  given  to  the  stockhold- 
ers, as  of  record  at  the  time,  to  subscribe  for  the  new  stock  at 
a  price  less  than  the  existing  market  quotations  of  the  old 
stock.  The  number  of  shares  of  new  stock  to  which  one  may 
subscribe  depends  upon  the  number  of  original  shares  which 
he  owns.  The  privilege  to  subscribe  for  each  new  share  is  one 
"  right."  It  is  used  in  the  plural  when  two  or  more  shares 
may  be  subscribed  for.  Such  a  privilege  generally  has  a 
value  —  the  value  largely  depending,  of  course,  upon  the 
price  at  which  the  original  stock  is  selling  in  the  market  — 
and  if  the  stockholder  does  not  wish  to  avail  himself  of  it, 
he  can  usually  sell  the  "  right  "  to  subscribe  in  his  stead  to 
some  other  party.  "  Rights  "  are  dealt  in  much  the  same 
as  other  securities.  They  may  apply  to  other  securities  than 
shares  of  stock.  (See  "  Arbitrage.") 

The  commission  charged  by  the  New  York  brokers  for  the 
purchase  and  sale  of  "  rights  "  is  the  same  as  the  amount  he 
would  receive  for  buying  or  selling  the  number  of  shares  called 
for  under  the  "  rights." 

When  a  stockholder  receives  "  rights  "  he  should  not  con- 
sider them  as  dividends,  even  although  they  have  a  value, 
for  it  is  usual  for  the  old  shares  to  decline  in  the  market  about 
the  equivalent  of  the  value  of  the  "  rights." 

Ring.  As  used  in  reference  to  speculation,  it  is  practically 
the  same  as  "  clique." 

Rio  Tinto.  Rio  Tinto  Co.,  Ltd.  A  copper  mine  located  in 
Spain;  largely  an  English  and  French  owned  corporation. 
The  stock  is  extensively  handled  in  London. 

Rock  Island.  The  Rock  Island  Co.,  a  "  holding  company  " 
(see  that  subject)  owning  the  entire  capital  stock  of  the 
Chicago,  Rock  Island  and  Pacific  R.  R.  Co.  Through  the 
latter  it  controls  the  Chicago,  Rock  Island  and  Pacific  Railway 
Co.,  and  the  St.  Louis  and  San  Francisco  R.  R.  Co.,  and  has 
one-half  interest  in  the  capital  stocks  of  the  Houston  and 
Texas  Central  R.  R.  Co.,  Houston,  East  and  West  Texas 
Ry.  Co.,  and  Houston  and  Shreveport  R.  R.  Co. 

1  Leonard  R.  Higgins. 


MONEY    AND    INVESTMENTS  341 

Rolling  Stock.  Locomotives,  cars,  hand  cars,  snow  plows; 
in  fact  all  such  equipment  of  a  steam,  electric,  or  other  rail- 
way. 

Room  Shorts.  (See  "  Selling  Short.")  Members  of  the 
stock  exchange  and  who  do  the  actual  trading  thereon;  that 
is,  "  board  men,"  who  have  been  "  selling  short." 

Room  Traders.    See  "  Traders." 

Round  Transaction  (or  Trade).  A  complete  transaction; 
i.  e.  buying  what  has  been  sold,  to  make  good  one's  contracts, 
or  selling  what  has  been  bought.  A  purchase  of  100  shares 
of  Union  Pacific  followed  by  its  sale  is  a  "  round  transaction." 

Round  Turn.    Explained  under  "  Cotton." 

Royal  Blue  Line.    The  Baltimore  and  Ohio  R.  R.  Co. 

Royal  Exchange.  Where  transactions  in  foreign  exchange 
occur  in  London. 

Rs.  The  sign  for  the  "  rupees  "  of  India,  as  $  is  for  our  dollar. 
(See  also  "  Rupee.") 

Rubber.    United  States  Rubber  Co. 

Rubber  Goods.    Rubber  Goods  Manufacturing  Co. 

Ruble.  The  unit  of  money  in  Russia,  and  equal  to  51  \ 
cents  in  United  States  money. 

Run.1  "  Run  on  a  bank."  A  prevailing  belief  that  a  bank  is 
insolvent,  or  in  a  condition  likely  to  make  it  difficult  for  the 
depositors  to  secure  their  money  on  demand,  often  causes  a 
sudden  panicky  rush  among  the  bank's  depositors  for  the 
purpose  of  withdrawing  what  is  due  them.  This  is  referred  to 
as  a  "  run  "  and  sometimes  brings  financial  disaster  to  the 
bank,  or  at  other  times  a  prompt  payment  of  all  claims  may 
restore  confidence,  stopping  the  "  run." 

Runner.    A  bank's  "  runner  "  is  its  messenger. 

Runner's  Exchange.  To  comprehend  this,  an  understanding 
of  the  matter  under  "  Clearing-House  "  is  first  necessary.  The 
"  runner's  exchange "  is  an  adjunct  of  the  Philadelphia 
Clearing-House.  It  is  a  secondary  exchange,  as  it  were,  which 

1  James  William  Gilbart,  writing  in  1834,  said:  "  In  the  year  1667 
occurred  the  first  '  run  '  of  which  we  have  any  account  in  the  history  of 
banking.  The  business  of  the  new-fashioned  bankers  had  increased  so  fast, 
and  they  had  become  so  numerous,  that  their  trade  was  supposed  to  be  at 
its  height  in  this  year;  when,  during  the  time  that  a  treaty  of  peace  was 
under  consideration,  the  Dutch  fleet  sailed  up  the  Thames,  blew  up  the 
fort  of  Sheerness,  set  fire  to  Chatham,  and  burned  four  ships  of  the  line. 
This  disaster  occasioned  great  alarm  in  London,  particularly  among  those 
who  had  money  in  their  banker's  hands,  as  it  was  imagined  that  the  king 
would  not  be  able  to  repay  the  bankers  the  money  they  had  lent  him.  To 
quiet  the  fears  of  the  people,  the  king  issued  a  proclamation,  declaring  that 
the  payments  to  the  bankers  should  be  made  at  the  Exchequer  the  same 
as  usual." 


342  MONEY    AND    INVESTMENTS 

takes  place  later  than  the  regular  morning  "  clearing."  It 
includes  items  due  that  day  and  received  in  the  morning 
mail,  which  are  made  payable  at  the  banks,  and  saves  the 
necessity  of  the  "  runner's  "  going  from  bank  to  bank,  which, 
in  Philadelphia,  is  a  laborious  task,  owing  to  the  widely 
distributed  territory  which  they  cover. 

Inasmuch  as  the  regular  "  clearing  "  for  the  day  takes 
place  at  an  early  hour  in  the  morning,  covering  only  items 
for  the  previous  day,  the  "  runner's  exchange  "  enables  the 
banks  to  ascertain  before  closing,  whether  or  no  items  re- 
ceived that  day  are  good.1 

Running  Account.  See  "  Open  Account,"  which  is  the 
same  thing. 

Rupee.  Although  the  "  sovereign  "  (pound  sterling)  is  the 
standard  coin  of  India,  the  silver  "  rupee  "  is  the  "  money  of 
account;  "  that  is,  the  actual  money  in  current  use,  and  is 
current  at  the  rate  of  fifteen  to  the  sovereign.  A  "  rupee  " 
is  equivalent  to  $.3244J  United  States  money.2  An  American 
dollar  is  roughly  reckoned  as  the  equivalent  of  three  "  rupees." 

"  Rs  "  is  the  sign  of  the  "  rupee."  A  "  lac  "  is  used  to 
designate  100,000  "  rupees."  The  method  of  writing  and 
pointing  off  sums  of  Indian  money  in  excess  of  a  "  lac  "  is 
thus:  Rs  80,35,000,  indicating  80  "  lacs  "  and  35,000  "  ru- 
pees "  over;  equivalent  to  8,035,000  "  rupees."  A  "  crore," 
as  a  "  crore  of  rupees,"  is  10,000,000  "  rupees  "  or  100  "  lacs." 

INDIA    MONEY    TABLE 

1    pie      =  $.0016899  + 

12  pies     =  1  anna  =  .0202791  + 
16  annas  =  1  rupee  =  .3244J 

Rupee  Paper.  The  Government  securities  in  India  being 
payable,  both  principal  and  interest,  in  "  rupees  "  (a  silver 
coin  equal  to  $.3244J  United  States  money),  are  termed 
"  rupee  paper."  When,  however,  payment  is  demanded  in 
England,  bills  of  exchange  on  Calcutta  are  given. 

Rutland.     Rutland  Railroad  Company. 


s 

S.  The  "  ticker  "  abbreviation  for  South,  Southern,  Series, 
or  Shares;  and  also  for  Seller,  when  accompanied  by  figures, 
as  for  example,  BO.  110.  S10,  which  indicates  that  Baltimore 

1  This  exchange  ceased  to  exist  Feb.  1,  1907,  as  the  Philadelphia  Clear- 
ing-House  Association  decided  to  abolish  it  and  consolidate  the  two  "  ex- 
changes "  into  one  daily  "  exchange  "  at  10  o'clock. 

2  Treasury  Department  Circular,  October  1,  1905. 


MONEY    AND    INVESTMENTS  343 

&  Ohio  common  stock  was  sold  at  110,  but  that  the  seller,  by 
giving  one  day's  notice  to  the  buyer,  is  entitled  to  make  de- 
livery any  time  within  ten  days.  Of  course  the  ten  days  is 
only  used  to  illustrate,  the  figures  would  vary  according  to 
the  terms  of  the  transaction.  (See  also  "  Seller's  Option.") 

s.  The  sign  for  the  English  "  shilling."  The  modern  way 
of  indicating  shillings,  however,  is  by  an  oblique  line  between 
the  sums  for  shillings  and  pence;  as,  for  instance,  5s.  4d.  is 
written  5/4. 

Sack.  A  sack  of  export  flour  contains  140  pounds.  A  sack 
of  Rio  coffee  is  estimated  at  200  pounds  and  Java  at  133 
pounds. 

Saddle.  To  force  an  undesirable  security  upon  any  one 
would  be  to  "  saddle  "  him  with  it. 

Safe  Deposit  Companies.  Companies  incorporated  for  the 
purpose  of  receiving  upon  deposit,  for  storage  and  safe- 
keeping, stocks,  bonds,  and  other  valuable  papers,  money, 
bullion,  jewelry,  household  gold  and  silverware,  and  such 
other  valuables  as  it  is  considered  wise,  not  only  to  store 
beyond  the  risk  of  fire,  but  also  of  burglars.  Such  companies 
are  supposed  to  have  very  extensively  built  vaults,  furnishing 
sufficient  protection  for  these  purposes.  In  addition  to  storage 
room  for  valuables  of  a  more  or  less  bulky  nature,  these  com- 
panies have  what  are  known  as  safe  deposit  boxes,  the  rental 
of  which  really  constitutes  their  principal  business.  In  these 
boxes,  which  are  of  various  sizes,  the  rental  varying  pro- 
portionately, may  be  kept  investment  securities  and  valuable 
papers.  The  access  to  such  a  box  is  obtained  by  the  lessee 
possessing  a  key,  which  will  only  unlock  the  box  after  a 
previous  unlocking  of  the  same  by  an  employee  of  the  safe 
deposit  company,  who  has  what  is  known  as  a  "  master  key," 
neither  one  being  able  to  effect  an  entrance  without  the 
other.  The  necessity  for  this  safeguard  is  self-evident.  It  is 
very  customary,  also,  for  the  customer  to  be  given  a  password, 
which,  in  case  of  doubt  upon  the  part  of  the  employee  as  to 
the  customer's  identity  and  right  to  seek  entrance  to  the  box 
corresponding  in  number  with  his  key,  he  may  give  the  pass- 
word, which  must  be  found  to  correspond  with  the  records 
of  the  company  before  doubt  may  be  removed. 

Advice  to  all  investors  and  owners  of  securities  cannot  be 
too  strenuously  urged  in  regard  to  the  renting  of  safe  deposit 
boxes,  and  to  further  impress  this  advice  upon  such  persons, 
reference  is  here  made  to  another  part  of  this  book:  viz., 
"  Care  of  Securities." 

Sag.  "  The  market  is  sagging."  A  small  but  general  decline 
in  prices.  "  The  market  did  not  break,  it  sagged."  Think  of 
a  telegraph  wire  suspended  from  two  poles,  covered  with  a 


344  MONEY    AND    INVESTMENTS 

frozen  mass  of  ice  and  sleet;  sagging  is  one  thing,  breaking  is 
more  serious. 

Saint  Paul.     Chicago,  Milwaukee,  and  St.    Paul  Ry.    Co. 

Sale  to  Arrive.  A  sale  dependent  upon  the  safe  arrival  of 
goods  in  transit. 

Salt.  A  mine  is  "  salted  "  when  good  ore  is  placed  there 
artificially  for  the  purpose  of  deceiving. 

Sanitary  District  Bonds.  Separate  municipalities,  not  terri- 
torially the  same  as  the  cities  which  they  embrace,  but,  usually, 
greater  in  extent,  have  at  times  been  formed  for  the  purpose  of 
securing  pure  water  supplies,  removal  of  sewage,  etc.  The 
Sanitary  District  of  Chicago  is  the  most  notable  example.  It 
has  its  own  officials  and  creates  its  own  indebtedness,  for  which 
all  the  taxable  property  therein  is  held  for  payment.  It  is  358 
square  miles  in  extent;  embraces  all  of  Chicago  and  consider- 
able adjacent  territory,  and  is  legally  permitted  an  indebted- 
ness of  not  exceeding  5%  of  the  assessed  valuation,  but  in  no 
event  over  $20,000,000.  The  well-known  "  Chicago  Drainage 
Canal  "  is  the  effort  of  this  district. 

Santa  Fe".  The  Atchison,  Topeka  &  Santa  Fe  Railway  Co. 
Also  Santa  Fe  Gold  &  Copper  Mining  Co. 

Satisfied.  When  an  indebtedness  or  obligation  is  paid,  it  is 
said  to  be  "  satisfied." 

Savings  Bank  (or  Institution).  A  bank  organized  under  the 
State  laws,  or  under  Federal  laws  if  in  the  District  of  Colum- 
bia, for  the  purpose  of  receiving  deposits,  the  intent  being  that 
such  deposits  shall  largely  be  the  savings  of  the  small  earners, 
such  as  labourers,  wage  earners,  and  small  salaried  persons  in 
general,  who  are  not  expected  to  be  in  a  position  to  intelli- 
gently invest  money  for  themselves,  and  whose  savings  are  so 
small  that  no  adequate  form  of  investment  can  easily  be  found. 
The  aggregate  of  these  savings  in  any  one  bank  is  supposed  to 
be  invested  by  an  intelligent  board  of  men  elected  for  that 
purpose,  usually  called  the  "  Board  of  Investment  "  or 
"  Finance  Committee."  The  legal  restrictions  placed  upon  the 
investment  of  "  savings  bank  "  funds  vary  greatly  in  different 
States,  some  being  very  strict  and  conservative  and  properly 
safeguarding  the  interest  of  the  depositors;  others  woefully 
lax  and  unsafe.  At  present  the  States  with  the  best  regula- 
tions, beginning  with  the  most  conservative,  are  New  York, 
Massachusetts,  Connecticut,  and  then  perhaps  Vermont, 
Maine,  and  New  Hampshire. 

In  selecting  a  savings  bank  for  the  purpose  of  making  a 
deposit,  one  of  the  essential  things  to  consider  is  the  class  of 
securities  in  which  the  funds  of  the  institution  are  invested. 
A  list  of  a  bank's  investments  may  be  generally  obtained  from 
the  officials  of  the  bank  under  consideration.  Failing  to 


MONEY    AND    INVESTMENTS  345 

obtain  one  there,  application  may  be  made  to  the  Board  of 
Savings  Bank  Commissioners  at  the  State  Capitol,  for  the 
last  Annual  State  Savings  Bank  Report.  It  is  customary,  in 
most  States,  for  these  reports  to  list,  separately,  the  security 
holdings  of  each  institution. 

One  able  financial  writer  makes  a  very  good  point  that 
institutions  of  this  kind  do  not  conduct  strictly  a  banking 
business;  that  is,  they  take  deposits  not  for  their  own  use, 
but  for  the  safe-keeping  and  benefit  of  the  depositors,  making 
safety  a  consideration  before  profit. 

Although  there  are  thousands  upon  thousands  depositing 
in  the  savings  institutions  of  this  country,  yet  there  are  count- 
less others  who  ought  either  to  place  their  funds  therein  or  a 
greater  proportion  than  they  now  do.  Small  as  may  seem  the 
interest  returned  to  the  depositors  by  these  institutions,  yet  it  is 
a  fact  that  they  furnish  by  far  the  safest  and,  in  the  long  run, 
the  most  profitable  employment  for  the  savings  of  a  great 
majority  of  people  of  limited  means.  The  larger  bulk  of  the 
loss  which  the  uninitiated  incur  by  speculating  in  State  and 
Wall  Streets  could  be  avoided  if  temptation  could  be  resisted, 
and  their  earnings  turned  into  the  savings  institutions  rather 
than  squandered  upon  the  gambling  wheel  of  speculation. 

An  idea  of  the  growth  of  a  savings  bank  account  may  be 
gathered  from  these  figures:  25  cents  saved  weekly  and  com- 
pounded twice  a  year  at  4%  per  annum  will  amount  to  $403 
in  twenty  years;  50  cents  will  amount  to  $806;  and  $5.00  to 
$8,070. 

Interest  ranging  from  3  to  5%,  according  to  the  bank,  is 
paid  on  money  deposited,  in  accordance,  of  course,  with  the 
rules  and  regulations  of  the  institution. 

The  laws  of  different  States,  or  the  regulations  of  different 
banks,  vary  more  or  less  as  to  the  amount  which  any  one 
depositor  may  have  standing  to  his  credit  on  the  books  in  any 
one  bank.  Unfortunately,  this  rule  is  easily  avoided  by  a  de- 
positor's making  use  of  the  name  of  his  wife,  mother,  sister, 
etc.,  and  opening  up  accounts  under  their  names. 

The  deposits  of  all  the  savings  banks  of  this  country  are 
estimated  at  over  $3,200,000,000,  belonging  to  7,696,229 
persons  and  divided  among  1,237  banks.  In  1820  there  were 
but  ten  banks,  $1,138,576  deposits  and  8,635  depositors. 

It  may  interest  some  to  know  that  we  are  indebted  to 
Daniel  Defoe  of  "  Robinson  Crusoe  "  fame,  as  the  originator 
of  the  modern  "  savings  bank  "  idea.  One  was  founded  in 
Hamburg  in  1778  and  at  Berne  in  1787,  the  idea  having  been 
suggested  by  Defoe  in  1697.  The  Rev.  H.  Duncan,  of  'Ruth- 
well,  Dumfriesshire,  is,  however,  known  as  the  "  father  of 
savings  banks,"  as  he  established  one  in  1810,  which  at  the 
end  of  four  years  had  accumulated  $5,800.  Acts  to  encourage 


346  MONEY    AND    INVESTMENTS 

"  savings  banks  "  were  passed  in  1817  in  England.     (See  also 
"  Mutual  Savings  Bank.") 

Savings  Bank  Account,  How  to  Open.  See  "  How  to 
Open  a  Savings  Bank  Account." 

Savings  Bank  Bonds.  As  this  term  is  used  among  financiers, 
bonds  which  certain  Eastern  States  that  have  passed  the  most 
conservative  legislation  in  relation  to  bonds  in  which  the 
savings  banks  therein  may  invest,  as  New  York  and  Massa- 
chusetts, are  commonly  understood.  The  term  may,  however, 
be  used  to  refer  to  bonds  which  the  savings  banks  of  any 
State  may  buy  provided  that  State  has  passed  any  restrictive 
legislation  whatsoever  in  relation  thereto. 

Savings  Banks  with  Capital  Stock.  Explained  under 
"  Mutual  Savings  Bank." 

Savings  Institution.     See  "  Savings  Bank." 

SB.     The  "  ticker  "  abbreviation  for  "  small  bonds." 

SC.  The  "  ticker  "  abbreviation  for  "  scrip." 
.  Scaled.  When  a  corporation  or  municipality  is  unable  to 
meet  the  principal  of,  or  interest  on,  a  debt,  and  is  able  to 
arrange  a  continuation  of  the  debt  at  a  lesser  rate  of  interest, 
or  an  extension  of  the  debt  for  a  lesser  principal  sum,  or  both 
of  the  above,  then  the  interest  has  been  "  scaled,"  or  "  the 
debt  scaled,"  or  both,  as  the  case  may  be. 

Scaled  Buying  or  Selling.  Transactions  of  a  security  made 
in  equal  amounts  upon  a  scale  of  prices;  for  instance,  a 
"  scaled  buying  "  of  Union  Pacific  may  be  buying  lots  of  100 
shares  each  as  the  stock  advances  every  two  points. 

Scalping.  "  Scalping  points  off  the  deal."  This  expression 
has  reference  to  those  taking  advantage  of  what  seems  some 
hidden  scheme  in  processof  consummation,  causing  an  advance 
in  prices  of  certain  securities.  Although,  not  knowing  just 
what  the  "  deal  "  is,  such  persons  take  advantage  of  the  rise 
in  prices  and  buy  and  sell  accordingly,  making  small  profits. 
By  this  method,  they  are  said  to  have  been  "  scalping  " 
profits.  Making  a  quick  and  small  profit  is  "  scalping." 

Scandinavian  Union.  Norway,  Sweden,  and  Denmark 
have  adopted  the  same  monetary  unit,  viz.:  a  single  gold 
standard  with  the  krone,  or  crown,  as  the  unit,  which  equals 
about  26.80 1  cents  United  States  money. 

School  District  Bonds.    See  "  Board  of  Education." 

School  Savings  Banks.  A  system  adopted  by  many  schools 
throughout  the  country  to  encourage  saving  among  the 
pupils.  The  money  saved  by  them  during  the  week  is  col- 
lected by  the  teachers  once  a  week  at  the  opening  of  the  school 

1  Oct.  1,  1905,  circular  of  the  United  States  Mint. 


MONEY    AND    INVESTMENTS  347 

session,  and  turned  over  to  the  principal,  he  placing  it  in  a 
savings  bank  in  the  name  of  each  depositor. 

Deposits  of  $300  and  over  draw  interest;  no  deposit  of  less 
than  $3.00  can  be  withdrawn,  except  in  case  of  sickness  or 
removal  from  the  city. 

On  January  1,  1906,  there  were  5,293  such  banks  in  opera- 
tion. These  were  in  1,023  schools  of  122  cities  of  25  States. 
The  amount  which  had  been  collected  up  to  that  date  was 
$4,864,575.98,  of  which  $3,641,015.66  had  been  withdrawn, 
leaving  a  balance  due  to  384,587  of  these  little  depositors,  on 
that  date,  of  $1,223,560.32.1 

Scrip.  In  financial  transactions,  a  temporary  paper  or 
certificate  is  often  issued,  to  be  exchanged  later  for  money  or 
a  permanent  certificate,  or  whatever  the  "  scrip  "  entitles 
the  holder  to  receive.  "  Scrip  "  is  frequently  issued  during  a 
reorganization,  or  stock  conversion,  to  represent  fractions  of 
shares  of  stock.  When  enough  of  these  are  presented  to 
represent  a  whole  share  they  may  be  exchanged  for  one. 
"  Scrip  "  is  a  name  applied  to  a  paper  entitling  a  person  to  the 
receipt  of  a  dividend  to  be  paid  later,  but  in  common  usage 
such  a  paper  is  called  a  "  due-bill."  During  the  Civil  War, 
and  shortly  following  that  time,  fractional  paper  currency 
was  issued  called  "  scrip." 

Scrip  Dividend.  Sometimes  corporations  wish  to  declare  a 
dividend  in  some  other  form  than  cash,  or  declare  what  is 
known  as  a  "  stock  dividend,"  and,  to  that  end,  may  issue 
what  substantially  amount  to  "  due-bills,"  carrying  no  voting 
power,  but  generally  at  some  later  date  convertible  into  stock; 
but  no  dividends  would  be  declared  upon  the  same  until 
conversion  had  taken  place,  although  they  might  bear  interest 
in  the  meantime. 

S.  D.  M.  J.  September,  December,  March,  and  June; 
interest  or  dividends  payable  quarterly  beginning  with 
September. 

Sealed  Bid.  When  an  issue  of  bonds  is  offered  for  sale  and 
for  which  the  intending  buyers  must  submit  "  sealed  bids," 
such  buyers  must  state  clearly  in  writing  what  they  will  pay 
for  the  bonds,  in  accordance  with  the  conditions  imposed  by 
the  seller.  The  buyer,  usually,  adds  such  conditions  regarding 
the  legality  of  the  issue,  etc.,  as  may  seem  to  him  wise.  Most 
issues  of  municipal  bonds  are  sold  in  this  way.  The  "  sealed 
bids  "  must  all  be  in  by  a  fixed  date  and  should  properly  be 
opened  in  the  presence  of  those  authorized  to  make  the  sale, 
and,  so  far  as  may  be,  at  the  same  time.  This  ensures  all 
bidders  being  treated  alike.  After  opening  the  bids  the  bonds 

1  The  writer  is  indebted  to  J.  H.  Thiry,  of  Long  Island  City,  N.  Y.,  who, 
above  all  others,  is  conversant  with  this  subject. 


348  MONEY    AND    INVESTMENTS 

are  "  awarded,"  or  sold,  to  the  highest  responsible  bidder  who 
is  given  a  reasonable  time  to  satisfy  himself  as  to  their  being  as 
advertised,  and  valid.  Sometimes  a  deposit  is  required  of  a 
certain  amount  in  cash,  or  its  equivalent,  with  each  bid, 
which  is  called  a  "  forfeit."  It  is  customary  to  use  for  this 
purpose  a  "  certified  check  "  for  the  amount  required,  and 
made  payable,  for  instance,  as  follows:  "  Pay  to  the  city  of 
New  Orleans,  when  accompanied  by  one  hundred  thousand 
dollars,  par  value,  of  legally  issued  bonds  of  the  said  city  "  - 
describing  the  bonds.  This  prevents  the  use  of  the  check  by 
the  city  in  case  it  cannot,  or  does  not,  comply  with  the  con- 
ditions as  to  legality  imposed  by  the  bidder. 

The  question  of  the  proper  wording  of  a  "  sealed  bid  "  has 
been  much  discussed  and  different  forms  are  in  use,  but  after 
describing  the  issue,  for  which  the  bid  is  being  submitted,  the 
following  wording  may  be  used  as  a  protection  to  the  bidder. 

"  The  usual  papers  evidencing  the  legality  of  the  issue 
satisfactorily  1  to  our  attorneys  to  be  furnished  us  prior  to  our 
taking  up  and  paying  for  the  bonds." 

It  is  not  unusual  for  municipalities,  in  advertising  for  sale 
an  issue  of  bonds  upon  which  sealed  bids  will  be  received,  to 
reserve  the  right  to  reject  any  or  all  bids.  This  safeguards 
them  against  the  necessity  of  making  a  sale,  provided  no 
satisfactory  bid  is  received. 

Seat.  One  who  possesses  membership  in  an  "  exchange  " 
would  be  said  to  possess  a  "  seat  "  therein. 

Seat  on  the  Stock  Exchange.    See  "  Stock  Exchange  Seat." 

Second  Consolidated  Mortgage  Bonds.  An  issue  secured  by 
a  mortgage  subsequent  to  one  "  consolidated  mortgage " 
(refer  to  "  Consolidated  Mortgage  Bond  ")  already  covering 
the  property,  and  to  all  other  prior  mortgages.  It  bears, 
roughly  speaking,  the  same  relation  to  all  the  earlier  mort- 
gages as  the  "  consolidated  mortgage  "  issue  does  to  all  issues 
prior  to  that  one.  A  bondholder  of  this  class  must  consider 
the  sum  total  of  all  prior  indebtedness  secured  by  the  "  first 
consolidated  "  and  earlier  mortgages,  in  order  to  determine 
what  value,  if  any,  there  is  left  in  the  property  to  secure  his 
investment.  It  must  certainly  rate  along  somewhere  with 
a  "  third  mortgage  "  and  perhaps  a  "  fourth."  Yet  the  rapid 
increase  in  the  value  of  the  property  due  to  good  business  and 
large  improvements  may  warrant  the  debt. 

Second  Mortgage.  A  mortgage  placed  upon  property  which 
already  has  another  mortgage  existing  upon  it;  for  instance, 
a  certain  piece  of  real  estate  supposed  to  be  worth  $10,000 
has  already  existing  upon  it  a  mortgage  for  $5,000;  the 

1  Note  the  spelling  of  this  word. 


MONEY    AND    INVESTMENTS  349 

owner  wishes  to  borrow  $2,000  more,  and  finds  some  one  who 
is  willing  to  accept  a  "  second  mortgage,"  upon  the  same,  for 
that  amount,  making  the  total  mortgage  indebtedness  against 
the  property  $7,000.  Suppose  the  owner  of  the  property  is 
unable  to  pay  the  interest,  when  due,  on  the  "  second  mort- 
gage; "  in  order  for  the  holder  of  this  mortgage  to  protect 
himself,  he  must  foreclose  the  property  under  his  own  mort- 
gage and  pay  the  holder  of  the  first  mortgage  his  due. 

In  taking  a  "  second  mortgage  "  one  should  have  reason  to 
believe  that  the  property  will,  at  any  time  during  the  life  of 
his  mortgage,  bring  at  forced  sale  a  price  sufficient  to  pay  off 
both  mortgages,  because  the  first  mortgage  must  be  satisfied 
in  full  before  the  "  second  mortgage  "  holder  receives  any- 
thing. 

Second  Mortgage  Bond.  A  bond  secured  by  a  mortgage 
upon  a  property  which  already  has  one  other  mortgage  exist- 
ing upon  it  and  which  mortgage  would  have  prior  claim  upon 
the  property  and  its  earnings.  (See  "  Second  Mortgage.") 

Second  of  Exchange.     See  "  Set  of  Exchange." 

Second  Preference  Shares.  The  English  equivalent  of  our 
"  second  preferred  stock." 

Second  Preferred  Stock.    See  "  Preferred  Stock." 

Seconds.     Second  mortgage  bonds. 

Quotations  in  the  newspapers  regarding  money  rates  appear 
something  like  this:  "  The  first  commercial  paper  sells  at  5%, 
good  names  sell  as  high  as  5J%,  the  names  that  are  termed 
'  seconds  '  sell  as  high  as  5£%."  "  Good  names,"  of  course, 
refers  to  the  makers  of  notes,  who,  in  this  case,  are  rated  at  a 
high  standard  of  credit.  "  Seconds,"  therefore,  would  refer 
to  the  next  class  of  borrowers  with  not  so  good  a  standing. 

Second  Teller.  The  "  receiving  teller "  of  a  banking 
institution. 

Second  United  States  Bank.  The  organization  of  many  local 
banks  followed  the  refusal  to  renew  the  charter  of  the  First 
Bank  of  the  United  States,  which  had  expired  in  1811.  These 
new  banks,  together  with  the  existing  war  —  1812  —  with 
England,  produced  wild  financiering  and  bank  note  inflation. 
As  a  check  upon  these  local  banks  and  as  a  means  of  returning 
to  specie  payments,  the  Second  Bank  of  the  United  States  was 
chartered  by  Congress,  April  10,  1816.  It  was  to  run  for 
twenty  years,  and  was  established  at  Philadelphia,  with  nine- 
teen branches  in  other  parts  of  the  country.  The  capital  was 
$35,000,000,  to  which  the  Government  subscribed  for  one- 
fifth.  The  charter  provided  for  the  deposit  of  public  moneys 
in  the  bank,  unless  otherwise  ordered  by  the  Secretary  of  the 
Treasury.  At  first,  the  bank  was  not  a  marked  success; 


350  MONEY    AND    INVESTMENTS 

there  was  more  or  less  scandal  attached  to  it.  It  went  to  the 
verge  of  bankruptcy  as  the  result  of  the  most  flagrant  kind  of 
bad  banking,  and,  instead  of  proving  a  check  to  the  local 
banks  in  their  wild  careers,  it  excelled  them  in  their  own 
loose  methods.  Later,  it  became  a  sound  and  solid  institution, 
and  grew  to  have  twenty-five  branches. 

Twenty  directors  were  elected  each  year  by  the  stock- 
holders, and  five  appointed  by  the  President,  subject  to  the 
confirmation  of  the  Senate.  During  most  of  the  bank's 
existence  —  from  1823  until  the  charter  expired  —  it  was 
under  the  Presidency  of  Nicholas  Biddle,  who  was  both  a 
Government  director  and  an  elected  director,  so  during  his 
management  there  were  but  twenty-four  directors  altogether. 

Trouble  was  precipitated  by  opposition  to  the  management 
of  the  Portsmouth,  N.  H.,  branch.  President  Jackson  grew 
hostile  to  it,  probably  on  account  of  not  being  able  to  control 
the  bank's  appointments  and  actions  politically.  Jackson 
had  collected  around  him  a  little  coterie  of  well-known 
characters,  other  than  members  of  his  cabinet,  who  were 
referred  to  as  his  "  Kitchen  Cabinet,"  prominent  among 
whom  were  Duff  Green  and  Francis  P.  Blair,  aided  by  their 
newspapers,  Isaac  Hill,  of  New  Hampshire,  and  Amos  Kendall, 
of  Kentucky.  As  Sumner  well  puts  it,  "  Andrew  Jackson's 
power  and  popularity,  moving  now  under  the  impulse  of  the 
passions  which  animate  an  Indian  on  the  war-path,  were  the 
engine  with  which  these  men  battered  down  a  great  financial 
institution."  l  An  effort  was  made  to  renew  the  charter  in 
1832,  and,  although  passed  by  Congress,  was  vetoed  by  Jack- 
son. In  1833  he  ordered  the  public  moneys  to  be  no  longer 
deposited  in  the  bank,  but  distributed  among  certain  State 
banks. 

Jackson  professed  to  believe,  as  is  shown  by  his  message  of 
1835,  that  the  bank  had  been  in  opposition  to  the  Government 
for  four  years,  which  proved  the  evil  effects  of  such  an  institu- 
tion. He  declared  the  bank  to  belong  to  a  system  of  distrust 
of  the  popular  will  as  a  regulator  of  political  power,  and  to  a 
policy  which  would  supplant  our  system  by  a  consolidated 
government. 

There  had  been  more  or  less  opposition  to  the  bank  through- 
out the  country.  At  one  time,  the  popular  feeling  was  such 
that  Kentucky  and  other  States  tried  to  tax  the  branches  out 
of  existence.  The  local  banks  naturally  anticipated  with 
pleasure  the  removal  of  their  large  competitor,  and  quite 
generally  lent  their  aid  to  Jackson's  scheme  of  destruction. 

Life  of  Andrew  Jackson  by  William  Graham  Sumner.  From  this 
admirable  volume,  and  John  Fiske's  "  History  of  the  United  States,"  the 
writer  drew  largely  for  information  regarding  the  bank. 


MONEY    AND    INVESTMENTS  351 

There  was  quite  a  general  belief  that  the  bank  had  too  great 
a  monopoly.  There  was  an  objection  to  the  large  foreign 
stockholding;  the  system  of  making  payments  at  one  branch 
with  drafts  on  another  was  a  grave  error,  etc.,  but  in  spite  of 
all  this,  there  was  a  great  public  confidence  in  the  bank  which 
nothing  was  able  to  shatter,  as  is  evidenced  by  the  following 
figures:  On  January  1,  1833,  previous  to  the  removal  of  the 
Government  deposits,  the  assets  stood  at  $80,800,000;  lia- 
bilities, $37,800,000;  besides  a  capital  stock  of  $35,000,000, 
for  the  payment  of  which  there  was  $43,000,000.  The  cir- 
culation was  $17,500,000. 

The  Government  shares  were  paid  off  at  the  rate  of  $115  per 
share.  In  January,  1836,  about  two  months  before  the  bank 
went  out  of  business,  the  stock  was  quoted  at  $116.  - 

Secured  Creditor.  One  who  has  certain  property  as  security 
for  the  entire  or  partial  satisfaction  of  his  debt. 

Securities.  All  forms  of  investments;  stocks,  bonds,  mort- 
gages, etc.,  of  every  kind;  the  written  or  printed  papers  that 
represent  the  ownership  of  corporations,  or  the  lender's 
evidence  of  the  borrower's  indebtedness. 

Securities  Companies.  These  are  "  holding  companies  " 
(to  which  refer),  corporations  formed  to  hold  the  shares  of 
other  companies.  The  shareholders  of  the  "  securities  com- 
panies "  own  through  this  medium  interests  in  other  corpora- 
tions. 

Security  Bills.  "  Bills  of  exchange  "  (which  should  be  under- 
stood first)  drawn  against  shipments  of  stock,  bonds,  or  other 
securities.  (See  "  Documentary  Commercial  Bill.") 

Security  Exchanges.  Sometimes  "  stock  exchanges  "  are 
referred  to  as  "  security  exchanges." 

Security  Insurance.  A  method  of  guaranteeing  the  interest 
or  principal,  or  both,  of  a  security  —  bonds,  mortgages,  etc. 
If  the  company  is  satisfied  with  the  risk,  and  the  insured  with 
the  premium  asked,  it  will  guarantee  the  latter  against  loss 
from  non-payment  of  the  security  in  question. 

Seigniorage.  In  the  United  States,  this  term  has  reference 
to  the  profit  arising  from  the  coinage  of  bullion.  As  the 
Government  does  not  purchase  gold  bullion,  but  coins  it  for 
private  account,  there  is  no  profit  on  such  coinage,  the  face 
value  of  the  coins  being  the  same  as  their  bullion  value.  There 
is,  however,  a  profit  on  the  coinage  of  silver  dollars  based  on 
the  present  ratio  of  sixteen  to  one;  therefore,  when  silver 
bullion  is  purchased  and  coined  there  is  a  profit  arising  from 
such  a  transaction,  as  the  commercial  value  of  silver  is  at  the 
present  time  far  below  the  coinage  value.  "  Seigniorage  " 
is,  therefore,  the  profit  arising  from  the  difference  between  the 


352  MONEY    AND    INVESTMENTS 

face  value  of  the  coin  and  the  commercial  value  of  the  metal 
which  it  contains. 

Sell  at  the  Market.  An  order  to  one's  broker  to  "  sell  at 
the  market  "  gives  the  broker  authority  to  sell  the  security 
described  at  the  best  obtainable  price. 

Sell  at  the  Opening.  An  order  to  sell  immediately  after  the 
opening  of  the  stock  exchange  at  the  best  price  obtainable. 

Sellers.     "  Sellers  71:  "  offered  at  71. 

Seller's  Option.  A  stock  exchange  term  for  a  contract 
under  which  the  seller  of  a  security  need  not  make  de- 
livery until  the  end  of  a  specified  time.  He  also  has  the 
right  to  make  delivery  any  time  within  the  period  covered  by 
the  contract,  by  giving  one  day's  notice  to  the  buyer.  The 
understanding  is  briefly  expressed  as  "  seller  4,"  "  seller  10," 
the  figures  indicating  the  number  of  day's  provided  for  in  the 
agreement.  By  the  New  York  Stock  Exchange  rules  the 
time  must  be  not  less  than  four  nor  more  than  sixty  days. 

Upon  Boards  of  Trade  and  Produce  Exchanges,  where 
grain,  cotton,  coffee,  etc.,  are  dealt  in,  this  method  of  trading 
also  exists  with  special  rules  and  customs.  (See  "  Delivery 
Day.") 

Seller  the  Month.  A  contract  by  the  terms  of  which  the 
party  selling  may  make  delivery  any  time  within  the  month. 

Seller  the  Year.  A  contract  by  the  terms  of  which  the 
party  selling  may  make  delivery  any  time  within  the  year. 

Selling  at  a  Premium.  Selling  at  a  price  higher  than  the 
par  or  face  value  of  the  security.  (See  "  Premium.") 

Selling  Off.     Prices  declining. 

Selling  on  a  Scale.  Selling  at  regular  intervals  as  the 
market  prices  change.  Example:  A  certain  stock  at  96,  98, 
100,  and  so  on,  at  every  advance  (or,  reversing  it,  at  every 
decline)  of  2%,  selling  a  stated  amount  each  time. 

Selling  Order.  An  order  given  to  a  broker  to  sell  a  certain 
security,  with  or  without  limit  as  to  price,  as  the  case  may  be. 
(See  "  Sell  at  the  Market.")  An  order  to  sell  is  good  for  the 
day  for  which  it  is  given  unless  otherwise  specified.  Some- 
times an  order  is  given  "  good  until  countermanded,"  or 
"  good  until  cancelled,"  by  which  the  broker  understands 
there  is  no  definite  limit  as  to  time,  but  brokers,  as  a  rule, 
remind  their  customers  at  frequent  intervals  regarding  such 
an  order,  to  be  sure  that  the  customer  wishes  it  still  to  remain 
in  force. 

Selling  Short.  Selling  something  which  you  do  not  own 
with  the  expectation  that  the  market  price  of  the  same  will 
decline  so  that  the  security  or  commodity  can  be  bought  at  a 


MONEY    AND    INVESTMENTS  353 

less  price  in  season  to  fill  the  order;  those  in  possession  of 
advance  information  regarding  a  stock,  or  who  think  they  are, 
"  go  short  "  of  that  stock  —  sell  for  future  delivery  —  to 
profit  by  the  anticipated  drop  in  price.  The  most  noted 
example  was  in  the  case  of  the  Northern  Pacific  Railway  stock, 
the  "  selling  short  "  of  which  caused  so  much  misery  on 
May  9,  1901.  Certain  bankers  in  New  York  had  obtained  con- 
trol of  most  of  the  Northern  Pacific  stock.  This  was  unknown 
to  the  public  at  large.  An  impression  spread  about  that 
Northern  Pacific  was  very  high  and  that  there  would  be  a 
decline  in  price;  the  result  was  that  many  people  sold  it 
"  short."  There  was  much  more  stock  sold  in  this  way  than 
there  was  stock  in  existence  outside  of  that  held  by  the 
bankers  above  mentioned,  and  the  people  who  had  sold 
"  short  "  were  unable,  therefore,  to  buy  enough  to  meet  their 
contracts.  The  result  was  that  the  stock  rapidly  advanced, 
numerous  failures  resulted  of  concerns  who  were  unable  to 
fill  their  orders  at  any  price,  and,  in  other  cases,  an  enormous 
advance  in  price  was  paid  by  people  who  did  succeed  in  filling 
their  orders. 

The  query  will  naturally  arise  as  to  how  delivery  may  be 
made  in  the  event  of  one's  selling  what  he  does  not  possess. 
For  an  explanation  of  this,  turn  to  "  Borrowing  Stock." 

Sell  Out.  An  understanding  of  buying  on  a  "  margin  "  is 
first  necessary.  If  a  customer  is  unable  to  furnish  "  margin  " 
when  called  for  by  his  broker,  and  the  latter  closes  out  the 
account,  he  is  said  to  have  sold  out  his  customer. 

Semi-Annual  Interest.  Interest  payable  twice  a  year.  If 
interest  on  a  bond  is  payable  January  1st,  the  next  corre- 
sponding half  yearly  period  would  be  July  1st.  The  interest, 
or  dividends,  upon  most  investments  are  payable  semi- 
annually. 

Semi-Tontine  Insurance.     See  "  Tontine  Insurance." 

Senior  Mortgage  (or  Lien).  First,  or  prior  mortgage; 
having  precedence  over  some  other  mortgage  or  lien.  "  Senior 
mortgages,"  when  used  in  reference  to  some  particular  mort- 
gage, would  indicate  all  mortgages  having  prior  claim  (senior 
to)  that  one. 

Serial  Bonds.  An  issue  of  bonds  which  is  payable  in  in- 
stalments. In  California,  every  municipal  issue  must  be  made 
payable  —  and  paid,  not  refunded  —  during  forty  years 
from  its  date. 

A  "  serial  bond  "  needs  no  sinking  fund.  It  takes  the  place 
of  a  sinking  fund,  and  is  one  of  the  best  methods  of  accom- 
plishing results  ordinarily  obtained  through  the  creation  of 
one.  The  Treasurer  of  Massachusetts  has  recently  very  wisely 


354  MONEY    AND    INVESTMENTS 

inaugurated  an  issue  of  "  serial  bonds  "  with  this  very  idea  in 
view. 

The  recent  very  able  city  treasurer  of  Boston,  Mr.  George 
U.  Crocker,  suggests  a  plan  for  the  issuing  of  "  serial  bonds  " 
perhaps  better  than  anything  yet  attempted.  Instead  of 
making  the  issue  due  in  equal  amounts  yearly  —  by  which 
method  the  greatest  burden  upon  the  tax-payer  would  be 
during  the  first  year,  as  the  interest  on  the  issue  would  then 
be  greater,  the  burden  growing  proportionately  less  each 
year  —  Mr.  Crocker  proposes  that  the  issue  shall  be  made  due 
in  such  annual  instalments,  which,  taking  into  consideration 
the  interest,  shall  make  the  total  amounts  necessary  to  be 
raised  each  year  approximately  equal.  As  the  interest  upon 
the  issue  would  constantly  be  growing  less,  the  principal  sum 
falling  due  each  year  would  consequently  be  greater.  Mr. 
Crocker  has  evolved  this  formula  by  which  may  be  easily 
ascertained  the  amount  of  principal  sum  which  should  be  due 
yearly  under  his  plan: 

P  =  total  issue  of  bonds. 
D!  =  amount  to  be  drawn  or  paid  1st  year. 
D2  =  amount  to  be  drawn  or  paid  2d  year, 
r    =  rate. 

n  =  number  of  years  to  run. 
Pr 

n— 1 
Then     Dj  =  (1+r)         —1 

D2  -D,/l4-rt 

D3  =D2(l4-r),  etc. 

The  objection  to  "  serial  bonds  "  arises  entirely  from  the 
point  of  view  of  the  investor,  as  it  may  be  impossible  for  him 
to  procure  an  amount  of  an  issue  due  in  one  year  sufficient  to 
satisfy  him.  This  method  of  payment  is  objectionable  to  a 
great  many  investors,  and,  in  Mr.  Crocker's  case,  a  working  out 
to  the  actual  amount  maturing  annually  would  naturally 
result  in  many  bonds  of  odd  denominations,  which  are,  as  a 
rule,  undesirable.  He,  therefore,  says  that  as  "it  (the  for- 
mula) cannot  be  used  to  definitely  fix  the  amount  of  principal 
to  be  paid  each  year  for  the  reason  that  we  must  pay  in  even 
thousands,  my  idea  would  be  to  use  the  formula  first  and  then 
adjust  the  results  so  that  even  thousands  of  principal  would 
fall  due  yearly." 

It  would  be  wise  for  anybody  contemplating  bidding  for  an 
issue  of  "  serial  bonds  "  to  refer  to  the  subject  "  Net  Return 
upon  the  Investment,"  as  the  basis  for  figuring  the  income 
return  upon  "  serial  bonds  "  has  been  confusing  to  many 
even  experienced  bankers. 

Under  this  subject  it  may  be  as  well  to  treat  of  another  bond 
of  this  nature,  a  typical  example  of  which  is  illustrated  in  the 


MONEY    AND    INVESTMENTS  355 

case  of  the  American  Mail  Steamship  Company.  This  com- 
pany issued  some  6%  bonds,  the  whole  issue  being  payable  in 
ten  annual  instalments,  but  instead  of  certain  bonds  being 
due  each  year,  one  tenth  of  each  bond  was  made  so  payable, 
being  made  up  of  ten  principal  coupons  of  $100  each,  besides 
the  coupons  for  the  interest,  the  interest  coupons  growing 
proportionately  less  in  amount  from  year  to  year.  This 
method  treats  every  bondholder  without  partiality.  In  case 
of  the  bonds  eventually  proving  an  unsatisfactory  investment, 
each  holder  would  have  had  equal  amounts  paid  off  on  each 
bond.  In  case  of  certain  numbered  bonds  maturing  each  year, 
the  holders  of  the  earlier  numbered  bonds,  in  the  event  of 
financial  insecurity  of  the  issue,  would  have  been  the  fortunate 
ones.  The  objection,  of  course,  to  a  partial  payment  bond  — 
by  which  this  plan  of  issue  should  be  technically  known  — 
is  that  unless  the  investor  owns  a  considerable  amount  of 
them,  it  will  call  for  the  re-investing  of  a  small  principal  sum 
annually,  which  is  often  undesirable.  Theoretically,  however, 
the  partial  payment  bond  is  the  true  method  of  payment,  as 
all  holders  fare  alike. 

Set  of  Exchange.  (See  "  Exchange.")  When  a  commercial 
house  in  one  country  draws  a  bill  of  exchange  against  one  in 
another,  it  sometimes  writes  these  in  duplicate,  possibly 
triplicate,  each  being  addressed  in  a  separate  envelope,  and 
sent  by  different  routes  to  avoid  inconvenience  in  case  of 
delay  in  the  mails.  Of  course  only  the  first  one  of  these  pre- 
sented is  paid.  These  are  called  "  Set  of  Exchange," 
collectively,  and  "  First  of  Exchange,"  "  Second  of  Ex- 
change," or  "  Third  of  Exchange,"  individually. 

Settlement-Day.     See  "  Account-Day." 

Settling  Price.  This  amounts  to  the  same  thing  as  the 
"  delivery  price "  as  described  under  "  Stock  Exchange 
Clearing-House." 

Seven  Day  Bills.  In  the  "  Bank  of  England  Statement  " 
(to  which  subject  refer)  there  appears  this  item:  "  7-day 
and  other  bills."  The  Bank  Statement  appears  weekly  upon 
Thursdays.  "  Seven-day  bills  "  are  "  bills  of  exchange  "  matur- 
ing between  the  dates  of  such  statements.  For  example:  All 
bills  falling  due  for  payment  between  the  18th  and  25th  of  the 
month  will  appear  in  the  statement  of  the  18th  as  "  seven- 
day  bills,"  or  "  short  bills." 

To  be  more  explicit,  the  term  "  seven-day  bills  "  signifies 
the  amount  of  seven-day  "  sight  drafts  "  which  the  bank 
has  issued  to  customers  who  wish  to  make  a  payment  in  what 
is  practically  a  Bank  of  England  note.  To  all  intents  and 
purposes,  they  are  checks,  with  the  one  exception  that  they 
are  not  payable  "  on  demand." 


356  MONEY    AND    INVESTMENTS 

Seven  Thirties.  Bonds  bearing  interest  at  the  rate  of  7.3% 
per  annum.  The  writer  knows  of  no  such  bonds  being  issued 
at  the  present  time,  but  they  were  more  or  less  frequently 
met  with  in  the  past,  and  some  issues  are  still  outstanding. 
The  peculiar  rate  was  based  on  its  being  equivalent  to  2c. 
per  day  interest  for  each  $100  invested.  During  the  years 
of  the  Civil  War,  the  United  States  Government  borrowed 
large  amounts  by  the-  issuance  of  "  seven  thirties."  Among 
municipalities,  Newport,  Kentucky,  has  given  us  an  example. 

SF.    The  "  ticker  "  abbreviation  for  "  sinking  fund." 

Shade.  To  "  shade  "  the  price:  to  make  a  slight  concession 
in  the  price. 

Shaded  Off.  This  expression  is  commonly  used  in  reference 
to  a  slight  decline  in  market  quotations. 

Shaking  Out.  When,  by  a  process  of  manipulation,  the 
owners  of  stocks  have  been  forced  to  sell,  the  stock  exchange 
broker  refers  to  this  as  a  "  shaking  out  "  of  stocks.  It  is  used 
in  reference  to  most  anything  speculated  in. 

Shareholder.    See  "  Stockholder." 

Shares.  When  this  word  is  used  in  relation  to  investments 
it  has  the  same  meaning  as  the  word  "  stock,"  but  is  more 
commonly  used  in  England,  Canada,  etc.,  than  in  this  country, 
where  "  stock  "  or  "  shares  of  stock  "  are  the  usual  expres- 
sions. Still,  in  England  they  distinguish  between  "  shares  " 
and  "  stock,"  as  will  be  seen  by  referring  to  the  latter  subject. 

Shaving  a  Note.  Discounting  a  promissory  note  at  a  rate  in 
excess  of  the  "  legal  interest."  Imagine  the  legal  interest  rate 
6%.  $30  would  be  the  greatest  amount  legally  collectable  on 
a  six  months'  note  for  $1,000,  drawn  with  interest  payable 
at  maturity.  To  get  around  this,  a  note  may  be  drawn  for 
$1,000  without  any  mention  whatsoever  of  the  rate  of  interest, 
but  such  sum  as  may  be  agreed  upon  deducted  at  the  time  the 
note  is  purchased  or  negotiated.  In  other  words,  the  note 
would  be  "  discounted  "  for  $75  or  $100,  or  whatever  the 
agreed  amount.  (See  "  Discount.") 

Sheared.     See  "  Fleece,"  meaning  the  same. 

Shekel.  The  "  shekel  "  of  the  ancient  Jews  signified  a 
weight.  In  those  days  money  had  no  regular  shape,  and  was 
without  marks  or  devices.  Thus  precious  metals  were  com- 
puted by  weight  when  used  in  payments.  A  "  shekel's  " 
weight  was  a  little  less  than  a  troy  half  ounce. 

Modern  slang  utilizes  "  shekel  "  to  indicate  that  one  has 
money  as  "  he  has  the  '  shekels.'  " 

Sherman  Act.  On  July  14,  1890,  the  "  Bland-Allison  Law  " 
was  repealed  and  the  "  Sherman  Act,"  so  called,  substituted 


MONEY    AND    INVESTMENTS  357 

in  its  place,  directing  the  purchase  of  4,500,000  fine  ounces  of 
silver  each  month,  or  at  least  that  proportion  which  could  be 
purchased  at  a  market  price  not  exceeding  a  coinage  value  of 
$1.2929  per  ounce. 

In  1893  it  was  found  that  the  price  of  silver  was  declining  so 
rapidly  —  a  panic  in  the  silver  market  occurring  in  July  in 
London,  when  the  price  fell  below  thirty  pence  per  ounce, 
which  would  be  equivalent  to  a  ration  of  1  to  31.43  —  that  it 
was  deemed  advisable  to  repeal  the  purchasing  clause  of  this 
Act,  which  Congress  did  on  November  1st,  of  that  year.1 

Sherman  Notes.  See  "  Treasury  Notes  of  Act  of  July  14, 
1890." 

Shifting  Loans.    Paying  off  loans  by  borrowing  elsewhere. 

Shilling.  A  silver  coin  of  Great  Britain  equal  to  l-20th  of 
the  pound  sterling,  or  12  pence,  and  equivalent  to  24.3  cents 
our  money. 

Shinplasters.  A  popular  name  for  the  "  fractional  cur- 
rency "  issued  for  small  change  during  the  Civil  War.  After 
the  war  of  1812,  when  metallic  money  was  scarce,  business 
houses  issued  scrip  which  went  by  this  same  name. 

Ship  and  Draw.  By  which  is  understood  that  the  security, 
note,  commodity,  or  whatever  it  may  be,  may  be  forwarded 
to  the  proper  party,  and  a  "  draft  "  for  the  amount  due  sent 
through  a  bank,  and  that  it  will  be  promptly  paid  upon 
presentation. 

Shipment  of  Money.  Modern  conveniences  solve  this 
problem  very  easily. 

First:  The  shipment  of  the  actual  money  itself:  For 
small  amounts  registered  mail  may  be  used,  but  the  Govern- 
ment liability  is  limited  to  $25  in  case  of  loss.  Express  com- 
panies provide  a  good  means  —  but  be  sure  to  value  your 
package  up  to  its  full  worth.  The  correct  way  is  to  hand  the 
money  to  the  company  and  let  them  count  it,  enclose  and 
seal  it  in  an  envelope,  and  give  you  the  proper  receipt. 

Second:  Transfer  of  the  equivalent  of  money,  "  postal 
money-orders,"  "  cashiers'  checks,"  "  certified  checks,"  "  ex- 
press money-orders,"  "  letters  of  credit,"  "  commercial  bills," 
"  certificates  of  deposit,"  "  cable  transfers,"  and  "  telegraphic 
transfers,"  all  of  which  are  explained  under  those  separate 
subjects. 

Ship  with  Draft  Attached.  The  same  as  "  ship  and  draw," 
except  that  the  whole  transaction  goes  through  the  bank, 
and  no  delivery  of  the  note  or  security,  etc.,  will  be  made 
except  in  exchange  for  the  amount  due. 

Shoe  Machinery.    United  Shoe  Machinery  Co. 

1  United  States  Treasury  Department  Circular  No.  72. 


358  MONEY    AND    INVESTMENTS 

Short.    See  "  Selling  Short." 

Short  Account.  (See  "  Selling  Short.")  All  of  a  particular 
security  which  has  been  sold  "  short  "  or  all  of  the  securities 
of  every  kind  which  have  been  sold  "  short."  In  trading 
in  grain  or  other  commodities  the  same  term  is  used. 

Short  Covering.  When  any  one  has  sold  a  security  "  short," 
and  thinks  it  the  proper  time  to  buy  it,  in  order  to  make  de- 
livery in  accordance  with  his  previous  agreement  so  to  do,  he 
"  covers  his  sale."  This  is  called  a  "  short  covering."  The 
"  shorts  are  covering  "  when  a  number  are  doing  this  simulta- 
neously. (See  "  Selling  Short.") 

Shorter's  Court.  The  court  outside  the  London  Stock  Ex- 
change to  which  those  having  transactions  with  the  American 
market  adjourn  after  four  o'clock,  London  time,  when  dealing 
ceases  on  the  London  exchange.  This  may  be  considered  as 
the  London  "  curb  market,"  although  not  so  called  on  that 
side  of  the  water. 

Short  Exchange.  A  "  bill  of  exchange  "  running  for  not 
more  than  thirty  days;  also  called  "  short-dated  exchange," 
"  short  bill,"  and  "  short-dated  bill." 

Short  Interest.  (See  "  Selling  Short.")  This  term  refers  to 
the  quantity  of  transactions  which  have  been  made  upon  the 
"  short  "  side.  In  other  words,  the  volume  of  "  short  "  sales, 
or  all  persons  in  a  given  market  with  such  interests. 

Short  Rate.  (As  used  in  fire  insurance.)  A  rate  is  based  on 
a  year's  period  of  time.  A  "  short  rate  "  is  the  rate  charged 
for  periods  less  than  one  year,  and  is  a  percentage  higher 
than  if  based  on  the  "  pro  rata  rate  "  which  the  time  the  policy 
is  in  force  bears  to  the  yearly  period. 

Short  Ribs  (Short  Rib  Middles).  The  unit  of  trading  is 
50,000  pound  lots  in  bulk,  or  multiples  thereof.  The  commission 
charged  is  25  cents  per  1,000  Ibs.  for  purchase  or  sale,  or  pur- 
chase and  sale.  The  usual  "  margin  "  required  is  one-half 
cent  per  pound. 

Shorts.  Those  who  have  sold  what  they  do  not  own,  ex- 
pecting to  buy  later  at  a  lower  price.  (See  "  Selling  Short.") 

Short  Side.  Those  who  have  thought  it  more  profitable 
to  "  sell  short  "  than  to  buy  in  anticipation  of  an  advance  in 
prices.  (See  "  Selling  Short.") 

Short  Stock.  By  reading  "  Selling  Short,"  the  heading  of 
this  paragraph  should  be  readily  understood. 

Siberians.  Securities  of  Siberia,  particularly  mining,  which 
are  handled  in  London.  Siberia  is  rich  in  metals. 

Sick  Market.  This  is  apt  to  follow  one  of  great  speculation, 
and  is  a  time  when  brokers  are  in  doubt  as  to  what  to  do,  and 
a  condition  of  hesitancy  prevails. 


MONEY    AND    INVESTMENTS  359 

Sight.  As  used  in  reference  to  commodities,  such  as  cotton, 
etc.,  has  the  same  meaning  as  "  visible  supply." 

Sight  Bill.  This  is  the  same  as  a  "  demand  bill  "  (to  which 
refer)  except  in  States  or  countries  where  "  grace  "  is  allowed 
on  a  "  sight  bill,"  for  in  such  cases  a  "  sight  bill  "  would  natu- 
rally not  be  payable  until  the  expiration  of  the  days  of  grace. 

Sight  Draft.  (First  read  "  Draft.")  A  draft  due  and  made 
payable  upon  presentation. 

Sight  Exchange.    See  "  Sight  Bill." 

Signature  of  a  Woman.    See  "  Woman's  Signature." 

Signing  by  Mark.    See  "  Mark  Signature." 

Sign  in  Blank.    See  "  Assign  in  Blank." 

Silent  Partner.  One  not  actively  engaged  in  a  business,  and 
who  is  not  generally  known  to  be  interested. 

Silver.  See  following  subjects  relating  to  silver;  also  "  Bar 
Silver." 

Silver  Act.    Same  as  "  Sherman  Act." 

Silver  Certificates.  The  act  of  Feb.  28,  1878,  provided  that 
any  holder  of  standard  silver  dollars  might  deposit  them  in 
sums  not  less  than  $10  with  the  Treasurer  or  any  assistant 
treasurer  of  the  United  States  and  receive  certificates  therefor, 
in  denominations  not  less  than  $10,  which  certificates  should 
be  receivable  for  customs,  taxes,  and  all  public  dues.  They 
are  not  "  legal  tender."  The  Act  of  Aug.  4,  1886,  provided 
for  the  issue  of  denominations  of  $1,  $2,  and  $5.  These  silver 
certificates  have  largely  taken  the  place  in  circulation  of  the 
standard  silver  dollars,  which  they  represent. 

On  Feb.  1, 1907,  the  face  value  of  these  certificates  outstand- 
ing amounted  to  $462,936,189. 

The  Treasurer  of  the  Philippine  Islands  is  authorized,  in 
his  discretion,  to  receive  deposits  of  standard  silver  coins  of 
one  "  peso  "  (see  that  subject)  in  sums  of  not  less  than  20 
"  pesos,"  and  to  issue  "  silver  certificates  "  in  exchange  there- 
for in  denominations  not  less  than  two  nor  more  than  ten 
"  pesos."  The  coin  so  deposited  must  be  retained  in  the 
treasury  and  held  only  for  the  payment  of  such  certificates 
on  demand.  These  certificates  are  receivable  for  customs, 
taxes,  and  all  public  dues  in  the  Philippine  Islands,  and  may 
be  reissued  when  so  received.  When  held  by  any  banking 
association  in  the  Islands  they  may  be  counted  as  a  part  of 
its  "  lawful  reserve."  i 

Silver  Coinage.  As  at  present  provided  by  law  in  the 
United  States,  "  standard  silver  dollars  "  and  subsidiary 
silver  are  coined  only  by  the  Government  for  its  own  account, 

1  An  Act  to  establish  a  standard  of  value  to  provide  for  a  coinage  system 
in  the  Philippine  Islands,  approved  March  2,  1903. 


360  MONEY    AND    INVESTMENTS 

and  from  bullion  already  on  hand,  and  the  profits  of  such 
coinage  belong  to  the  Government. 

The  report  of  the  Secretary  of  the  Treasury  for  the  fiscal 
year  1905  stated  that  the  stock  of  bullion  purchased  under 
the  Act  of  July  14,  1890,  had  become  exhausted,  and  the 
coinage  of  silver  dollars  necessarily  discontinued,  and  no 
subsidiary  silver  coins  were  being  made  except  by  the  re- 
coinage  of  the  abraded  and  uncurrent  coins  of  the  same  de- 
nomination as  they  accumulated  in  the  treasury.  Following 
this,  the  Government  began,  on  Aug.  1,  1906,  to  enter  the 
market  for  the  purchase  of  silver  bullion  for  the  subsidiary 
coinage.  The  first  purchase  was  at  65.44  cents  per  ounce. 
The  price  steadily  advanced  until,  in  November,  it  had  passed 
71  cents. 

Silver  Dollars.    See  "  Standard  Silver  Dollars." 

Silver  Product  of  the  United  States.  The  Bureau  of  the  Mint 
estimates  the  total  production  of  silver  in  this  country  for  the 
year  1905  as  56,101,600  fine  ounces,  valued  at  $34,221,976. 
For  1906,  it  is  estimated  at  56,183,000  ounces,  valued  at 
$37,642,610,  taking  $.67  per  fine  ounce  as  the  average  price 
in  New  York  based  upon  the  London  daily  quotations  con- 
verted into  New  York  exchange. 

Silver  Product  of  the  World.  Beginning  with  1860  the 
commercial  value  of  silver  produced  was  $39,337,000.  There 
was  a  gradual  increase,  for  in  1870  the  product  was  $57,173,- 
000;  in  1880,  $85,640,600;  in  1890,  $131,937,000.  During 
1893  the  coinage  of  silver  in  British  India  was  suspended; 
there  was  a  panic  in  the  silver  market  in  London;  the  United 
States  repealed  the  clause  of  the  Act  of  July  14,  1890,  authoriz- 
ing the  purchase  of  4,500,000  fine  ounces  of  silver  per  month. 
As  a  result  of  all  these  happenings  the  annual  commercial 
value  of  silver  produced  suddenly  fell  off.  In  1895  it  was 
$109,545,600;  in  1902,  $88,486,500;  in  1903,  $90,686,500; 
in  1904,  $97,666,300,  and  in  1905,  $95,977,400.1  Total  world's 
output  (this  and  some  of  the  foregoing  figures  partially 
estimated)  from  1860  to  1902  inclusive  was  $3,690,897,300. 
As  the  coining  value  has  been  generally  in  excess  of  the 
commercial  value,  the  former  for  the  same  length  of  time  was 
$5,185,378,800. 

The  total  coining  value  of  silver  produced  in  the  world 
from  the  discovery  of  America  to  1902  inclusive  is  $11,854,- 
213,500.  (See  also  "  Bar  Silver.") 

Silver  Treasury  Certificates.  The  same  as  "Silver  Certif- 
icates." 

1  The  figures  from  1860  to  1872  inclusive  were  compiled  by  Dr.  Adolph 
Soetbeer.  Since  1872  the  estimates  are  those  of  the  Bureau  of  the  United 
States  Mint. 


MONEY    AND    INVESTMENTS  361 

Simple  Interest.  Interest  upon  the  principal  sum  only. 
An  example  will  perhaps  make  this  clear:  Green  loans  Black 
$1,000  for  six  months  at  5%,  the  interest  amounting  to,  say, 
$25.  If  at  the  end  of  that  time  the  interest  is  not  paid,  Green 
cannot  collect  additional  interest  on  the  $25  for  such  time 
thereafter  as  Black  fails  to  make  the  payment.  "  Compound 
interest  "  would  permit  of  charging  interest  on  the  $25; 
that  is,  interest  upon  interest.  In  savings  bank  accounts 
"  compound  interest  "  is  usually  allowed;  that  is,  at  the  end 
of  stated  intervals,  say  twice  a  year,  the  interest  accumulated 
upon  the  depositor's  account  is  entered  to  his  credit,  increasing 
the  principal  sum  that  much,  and  the  total  sum  goes  on  draw- 
ing interest. 

Single  Entry  Bookkeeping.  "  Single  entry  bookkeeping,"  as 
its  name  signifies,  is  a  method  by  which  only  one  entry  is 
made,  as  distinguished  from  "  double  entry  bookkeeping." 
"  Single  entry  "  differs  from  "  double  entry  "  in  that  by  the 
former  method  each  entry  necessitates  but  a  single  debit  or 
credit,  which  will  be  more  readily  understood  if  the  reader 
will  turn  to  the  subject  "  Double  Entry  Bookkeeping."  It 
will  be  seen  by  this  that  under  "  single  entry,"  the  only  ac- 
counts are  those  with  parties  dealt  with,  and  only  transactions 
which  involve  the  debiting  or  the  crediting  to  such  parties 
appear  in  the  books.  This  system  requires  but  one  book  — 
a  ledger  —  which  was  the  only  book  formerly  used;  but  now 
this  has  been  modified  to  include  day  book  and  cash  book. 

Single-Name  Paper.  A  note  for  which  a  single  individual, 
firm,  or  corporation  is  responsible  for  payment;  a  note  bearing 
but  one  signature  and  without  indorsers.  Also  mentioned 
as  "  single  names  "  and  "  straight  paper." 

Single  Option.  Either  a  "  put  "  or  a  "  call."  (See  "  Put  " 
and  second  paragraph  under  "  Call.") 

Single  Standard.  (First  read  "  Standard  of  Value.")  A 
monetary  system  by  which  values  are  measured  in  one  metal 
only  and  not  by  the  use  of  two,  as  explained  under  "  Bimetallic 
Standard  "  and  "  Bimetallism." 

Sinking  Fund.  Sums  set  aside  at  stated  intervals  to  provide 
for  the  payment  of  all  or  part  of  the  principal  of  a  debt.  A 
method  of  sinking  or  extinguishing  it;  a  provision  for  an 
obligation  not  yet  matured,  and  as  binding  upon  the  issuer 
as  any  other  provision  of  the  mortgage. 

This  money  is  sometimes  used  to  buy  in,  or  pay  off,  some 
of  the  debt  itself,  from  time  to  time,  under  conditions  pro- 
vided; or  may  be  held  until  the  maturity  of  the  debt  and 
then  applied  to  its  payment,  and,  in  the  meantime,  invested 
in  other  securities,  so  that  it  may  increase  in  amount. 


362  MONEY    AND    INVESTMENTS 

The  conditions  attached  to  sinking  funds  differ,  but  the 
best  form  is  that  which  applies  the  money  as  raised  directly 
to  the  extinguishment  of  the  debt  for  which  it  was  created, 
thus  avoiding  any  possible  loss  by  temporarily  investing  it 
otherwise. 

In  many  bond  issues  a  condition  is  imposed  that  the  sinking 
fund  shall  be  applied  to  the  principal  by  the  calling  by  lot 
of  a  certain  number  of  bonds  annually.  This  is  very  objection- 
able, and  it  is  hard  to  advance  any  good  reason  for  such  a 
plan.  It  frequently  works  hardship  upon  investors  who  own 
bonds  subject  to  call  in  this  way,  and  it  often  prevents  bonds 
advancing  to  a  premium,  owing  to  the  fact  that  every  bond 
of  an  issue  subject  to  call  by  lot  must  necessarily  be  looked 
upon  as  subject  to  payment  at  the  next  call,  making  it  unsafe 
to  figure  the  interest  return  upon  such  bonds  based  on  but  a 
comparatively  short  time  to  run.  In  practice,  however, 
many  issues,  as,  for  instance,  the  Louisville  &  Nashville  6's, 
have  advanced  to  a  premium,  although  subject  to  call.  This 
is  one  of  the  exceptions,  and,  moreover,  when  these  bonds  are 
called,  they  are  paid  at  10%  premium.  A  better  plan  is 
explained  under  "  Serial  Bonds." 

The  "  sinking  fund  "  feature  is  deserving  of  much  thought, 
and  should  be  well  understood  by  the  investor.  It  will  be 
found  referred  to  in  many  places  in  this  work,  and  is  some- 
thing the  purchaser  of  bonds  cannot  afford  to  pass  over  lightly. 

Generally  speaking,  "  sinking  funds  "  are  desirable  in 
issues  against  properties  which  have  not  demonstrated  a 
tendency  to  liberal  expenditures  out  of  earnings  for  the 
maintenance  of  the  property  at  a  high  standard  of  efficiency; 
and,  also,  in  the  case  of  properties  which  are  exhausting 
themselves,  such  as  mines,  oil  wells,  and  the  like.  Or,  in  other 
words,  "  sinking  funds  "  are  advisable  in  those  issues,  the 
security  of  which  is  likely  to  become  less  before  maturity. 
Industrial  concerns  dependent  upon  a  business  of  an  unstable 
character  should  create  "  sinking  funds  "  for  the  retirement 
of  indebtedness.  In  large  corporations,  like  our  well-estab- 
lished railroads,  many  financiers  argue  against  the  estab- 
lishment of  a  "  sinking  fund  "  altogether.  It  is  in  the  smaller 
corporations  where  the  future  cannot  be  so  well  anticipated 
that  a  "  sinking  fund  "  should  be  most  carefully  considered. 

This  statement,  which  appeared  in  a  report  of  one  of  our 
large  railroad  companies,  is  of  interest: 

"  In  1903-04  the  surplus  profits  in  excess  of  charges  was  no 
less  than  $9,814,000,  and  the  whole  of  this  was  used  for  capital 
purposes;  and  in  five  years  the  profit  devoted  to  improvements 
and  capital  purposes  has  been  no  less  than  $55,000,000.  In 
this  sum  I  have  included  about  $800,000  a  year  appropriated 
out  of  profits  to  sinking  funds.  Sinking  funds  for  bonds  se- 


MONEY    AND    INVESTMENTS  363 

cured  upon  improving  properties  may  rightly  be  considered 
profits;  on  the  other  hand,  sinking  funds  for  the  purpose  of 
retiring  bonds  secured  upon  depreciating  properties  ought  to 
constitute  a  charge  upon  profits." 

Sinking  Fund  Bonds.  It  is  not  often  nowadays  that  bonds 
are  issued  with  "  sinking  fund  "  as  the  principal  title,  but 
generally  with  some  such  nomenclature  as  "  First  mortgage 
4%  sinking  fund  bonds."  Formerly,  bonds  were  occasionally 
issued  as  simply  "  sinking  fund  "  bonds,  notably,  the  Union 
Pacific  Sinking  Fund  issue  which  matured  in  1899.  As  a 
matter  of  fact,  any  bond  may  be  a  "  sinking  fund  "  bond,  the 
sinking  fund  feature  being  simply  one  of  the  provisions  pro- 
vided for  in  the  deed  of  trust,  for  a  better  understanding  of 
which  see  "  Sinking  Fund." 

Sinking  Fund  Mortgage.  A  mortgage  securing  a  bond  re- 
deemable by  a  sinking  fund  would  be  so  termed.  (See  "  Sink- 
ing Fund.") 

Sixes.  "  Bills  of  exchange  "  due  in  six  months;  "  dis- 
counted "  notes  due  in  six  months;  and  also  used  in  speaking 
of  bonds  bearing  6%  interest. 

Six-Pence.  A  silver  coin  of  Great  Britain,  equal  in  value  to 
about  $.121  United  States  money. 

Sixteen  to  One.  By  the  ratio  of  "  16  to  1  "  it  is  understood 
that  the  mint  values  of  sixteen  ounces  of  silver  and  one  ounce 
of  gold  shall  be  equal;  in  other  words,  sixteen  ounces  of  silver 
and  one  ounce  of  gold  shall  be  each  coinable  into  an  equal 
number  of  standard  dollars.  As  a  matter  of  fact,  the  United 
States  standa.d  ratio  is  not  exactly  16  to  1,  but  15.988  to  1. 

Sixties.     See  next  subject. 

Sixty  Day  Bill.  A  bill  of  exchange  (see  "  Exchange  ") 
may  be  drawn  payable  in  sixty  days  after  date,  but  it  is  more 
customary  to  draw  them  payable  sixty  days  "  after  sight;  " 
that  is,  after  presentation.  If  in  the  latter  form,  and  drawn 
on  England,  roughly  speaking,  ten  days  may  be  reckoned  as 
the  time  elapsed  after  drawing  before  presentation,  and,  as 
three  days'  grace  is  allowed  there  on  time  bills,  it  would  make 
a  total  of  approximately  seventy-three  days  before  actual 
maturity. 

Bills  of  this  kind  are  called  "  Sixties." 

Sky-Rocketing.  Pushing  prices  of  securities  up  to  enor- 
mous heights;  unnatural  levels;  creating  an  unstable  condi- 
tion of  affairs;  forcing  the  price  of  this,  that,  and  the  other 
security  up  with  startling  rapidity;  booming  prices. 

Slaughter.   To  sacrifice  securities  at  unnecessarily  low  prices. 

Slid  Off.     Declined  in  price. 

Slipped  Back.    Prices  declined. 


364  MONEY    AND    INVESTMENTS 

Sloss-Sheffield.    Sloss-Sheffield  Steel  &  Iron  Co. 

Slow  Assets.  Property  which  cannot  be  readily  converted 
into  money;  property  which  is  not  salable  at  the  time,  but 
which  may  be  during  some  future  period. 

Slug.  A  fifty-dollar  gold  piece  of  the  United  States  Assay 
Office  in  San  Francisco.  It  first  appeared  in  April,  1851. 

The  coins  were  in  general  circulation  in  California  about 
the  middle  of  the  last  century.  They  were  in  two  shapes, 
round  and  octagonal,  and  are  now  to  be  found  only  in  col- 
lections, and  are  selling,  when  any  are  to  be  had,  at  $150  to 
$175  each. 

When  these  were  issued  they  put  a  stop  to  the  coinage  of 
private  mints  in  that  section.1 

Sluggish.  Business  very  quiet;  very  few  transactions 
taking  place. 

Slump.    A  sudden  and  big  fall  in  prices. 

Sm.    Smelter. 

Small  Bonds.  Transactions  in  United  States  Government 
Bonds  are  usually  for  $1,000  par  value  or  multiples  thereof. 
Quotations  on  "  small  bonds  "  often  differ  from  those  of 
larger  denominations  of  the  same  issue,  according  to  supply 
and  demand. 

Any  bond  of  a  lesser  denomination  than  $1,000  is  called  a 
"  small  bond." 

Smash.  This  term  is  sometimes  used  when  there  is  a  very 
sudden  fall  in  prices  in  the  stock  market,  and  everything 
goes  to  "  smash,"  as  it  were,  and  almost  a  panicky  condition 
exists. 

Smelt.    Smelter. 

Smelting.    American  Smelting  &  Refining  Co. 

Snuff.    American  Snuff  Co. 

Soft.  The  market  softens  when  there  is  a  small  decline  in 
prices. 

Soft  Coalers.  Railroad  companies,  the  earnings  of  which 
are  more  or  less  dependent  upon  the  transportation  of  bitu- 
minous coal,  including  such  roads  as  the  Chesapeake  &  Ohio, 
the  Norfolk  &  Western,  the  Hocking  Valley,  etc. 

Soft  Money.  Paper  money;  a  term  used  to  distinguish  it 
from  metallic  money. 

Soft  Spot  in  the  Market.  When  one  or  more  securities  show 
a  weakness  in  price;  a  tendency  to  decline,  but  which  con- 
dition does  not  extend  to  the  market  in  general. 

1 "  New  Varieties  of  Gold  and  Silver  Coins,  Counterfeit  Coins,  and 
Bullion;  With  Mint  Values,"  by  Jacob  R.  Eckfeldt  and  William  E. 
DuBois,  Assayers  of  the  Mint  of  the  United  States. 


MONEY    AND    INVESTMENTS  365 

Sol.  The  monetary  unit  of  Peru,  equal  to  $.487  United 
States  money. 

Solvent.  Having  financial  resources  sufficient  to  pay  all 
debts  as  they  severally  become  due. 

Soo  Line.  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie  Ry. 
Co. 

Sou.  A  small  French  coin,  equal  to  about  $.0096^  United 
States  money. 

Southerns.  Railway  companies  in  the  Southern  States 
whose  securities  are  listed  upon  the  New  York  Stock  Ex- 
change. 

South  Sea  Bubble.  The  Earl  of  Oxford,  at  the  time  (1710) 
Prime  Minister  of  England,  proposed  a  plan  by  which  the 
holders  of  the  Government  debt  should  be  allowed  to  ex- 
change the  same  for  shares  in  the  South  Sea  Company,  a 
corporation  which  was  granted  certain  trading  monopolies 
along  the  Atlantic  coast  of  South  America.  This  was  at- 
tempted as  a  method  of  consolidating  the  Government's  in- 
debtedness and  to  effect  a  saving  in  interest.  It  being  upon 
the  eve  of  a  great  speculative  era  in  England,  many  exchanges 
were  made,  and  the  price  of  the  shares  of  the  South  Sea 
Company  advanced  tremendously.  The  whole  plan  proved 
worthless  and  collapse  followed  in  1720,  to  the  great  loss  of  all 
the  shareholders. 

This  era  of  unreasonable  speculation  above  referred  to  is 
partially  explained  by  Bagehot  by  the  statement  that  there 
were  no  banks  at  that  time  for  the  deposit  of  the  funds  of  the 
people,  and  the  speculation  was  the  natural  outlet  for  their 
money.1 

Sovereign.  A  gold  coin  of  Great  Britain  equal  in  value  to 
the  pound  sterling,  or  $4.866^  United  States  money. 

1  Smollett  in  his  History  of  England  says:  "  The  directors  (April  7, 1720) 
opened  their  books  for  a  subscription  of  one  million,  at  the  rate  of  £300 
for  every  £100  capital.  Persons  of  all  ranks  crowded  to  the  house  in  such 
a  manner,  that  the  first  subscriptions  exceeded  two  millions  of  original 
stock.  In  a  few  days  this  stock  advanced  to  £340;  and  the  subscriptions 
were  sold  for  double  the  price  of  the  first  payment. 

"The  infatuation  prevailed  till  the  8th  day  of  September,  when  the  stock 
began  to  fall.  Then  did  some  of  the  adventurers  awake  from  their  delirium. 
The  number  of  the  sellers  daily  increased .  On  the  29th  day  of  the  month,  the 
stock  had  sunk  to  one  hundred  and  fifty.  Several  eminent  goldsmiths  and 
bankers,  who  had  lent  great  sums  upon  it,  were  obliged  to  stop  payment, 
and  abscond.  The  ebb  of  this  portentous  tide  was  so  violent,  that  it  bore 
down  everything  in  its  way;  and  an  infinite  number  of  families  were  over- 
whelmed with  ruin.  Public  credit  sustained  a  terrible  shock;  the  nation 
was  thrown  into  a  dangerous  ferment;  and  nothing  was  heard  but  the 
ravings  of  grief,  disappointment,  and  despair.  Some  principal  members  of 
the  ministry  were  deeply  concerned  in  these  fraudulent  transactions. 
When  they  saw  the  price  of  stock  sinking  daily,  they  employed  all  their 
influence  with  the  bank  to  support  the  credit  of  the  South  Sea  Company." 


366  MONEY    AND    INVESTMENTS 

Special  Assessment  Bonds.  Bonds  for  which  a  special  dis- 
trict, or  section,  of  a  city  is  taxed  to  meet  interest  and  princi- 
pal; the  city  as  a  whole  not  being  held  for  their  payment,  the 
idea  being  that  the  section  improved  by  the  expenditure  of 
the  proceeds  of  the  bond  sale  should  be  responsible  for  the 
payment  of  the  bonds.  (Read  "  Street  Improvement  Bonds," 
all  of  which  applies  here.)  It  is  better  for  the  novice  in  invest- 
ment matters  to  fight  shy  of  these  bonds  altogether. 

Special  Deposit.  A  "  special  deposit  "  differs  from  a  "  gen- 
eral deposit  "  or  a  deposit  of  the  ordinary  nature,  by  being 
placed  in  a  banking  institution  for  retention  and  safe  keeping 
only,  but  not  to  be  used  by  the  bank  as  are  its  general  funds, 
which  treatment  an  ordinary  or  general  deposit  would  re- 
ceive. 

Special  Depository.  This  will  be  understood  by  reading 
"  United  States  Depository." 

Special  Indorsement.  One  which  specifies  the  person  or  to 
the  order  of  whom  payment  shall  thereafter  be  made,  and 
which  calls  for  the  indorsement  of  the  party  to  whom  it  was 
made  payable  before  it  can  be  further  negotiated;  as,  for 
example,  suppose  a  note  is  made  payable  to  Henry  Adams. 
He  makes  a  "  special  indorsement  "  by  writing  across  the 
back  "  Pay  to  James  Frazer  or  order,"  and  then  signing  his 
own  name  below;  i.  e.  "  Henry  Adams."  By  this  form  James 
Frazer  is  specified  as  the  person  to  whose  order  the  paper 
shall  afterward  be  paid,  and  he  must  indorse  it  before  it  can 
be  further  negotiated. 

Specialist.  Certain  stock  brokers  are  sometimes  known  as 
"  specialists,"  which  means  that  they  have  particular  interest 
in  one  or  more  securities  and  devote  much  of  their  time  to 
buying  and  selling  the  same;  their  interest  in  such  being  well- 
known  to  other  brokers. 

Specialized.    See  "  Crossed  Check." 

Special  Partner.  A  partner  in  a  firm  whose  liability  is 
legally  limited  to  the  amount  of  capital  contributed  by  him. 
In  order  to  become  a  "  special  partner  "  certain  legal  formali- 
ties must  usually  be  complied  with  or  the  "  special  partner  " 
is  considered  as  a  general  partner.  A  "  special  partner  " 
is  not  supposed  to  take  any  active  part  in  the  business. 

Specials.    See  "  Council  Drafts." 

Special  Settlement  (Settling)  Day.  A  London  term.  When 
a  new  issue  of  securities  is  being  made,  dealings  in  the  first 
instance  always  take  place  for  the  "  special  settlement,"  and, 
until  that  is  granted,  no  settlement  of  any  transactions  in  that 
particular  security  can  occur.  When,  however,  that  has 
been  granted,  the  security  takes  its  place  in  the  ordinary  way, 


MONEY    AND    INVESTMENTS  367 

and  is  dealt  in  for  the  fortnightly  accounts.  (See  "  Fortnightly 
Settling-Days. ") 

Specialties.  "  Boston  specialties  were  traded  in  largely 
to-day."  Each  of  the  large  stock  exchanges  has  various  se- 
curities which  are  dealt  in  more  particularly  on  such  exchange 
than  upon  any  others;  the  prices  of  such  securities  being  very 
largely  regulated  by  the  quotations  upon  that  particular 
exchange,  and,  to  a  great  extent,  transactions  in  these  "  spe- 
cialties "  are  consummated  upon  that  exchange.  If  a  broker 
in  New  York  is  given  an  order  to  sell  a  stock  which  is  a  Boston 
"  specialty,"  the  chances  are  that  he  will  telegraph  the  order 
to  Boston,  and  have  the  sale  made  on  the  latter  exchange. 
"  Boston  specialties,"  therefore,  are  such  securities  as  are  more 
particularly  handled  in  Boston  than  elsewhere.  Many  of  the 
copper  stocks  are  "  Boston  specialties." 

"  Specialties  advanced;  "  meaning  that  there  was  no  general 
advance  in  prices,  but  simply  a  rise  in  the  quotations  of  certain 
securities  which  were  attracting  special  interest  at  the  time. 

Specie.  There  seem  to  be  several  different  uses  for  this 
word.  As  understood  by  the  United  States  Mint,  it  means 
coin  of  any  denomination  and  of  any  metal  in  contradistinction 
to  notes  and  bills.  In  the  term  "  specie  payment,"  the  word  is 
held  to  apply  also  to  gold  and  silver  bullion. 

When  reference  to  "  specie  "  is  made  in  relation  to  the 
lawful  money  reserve  of  a  national  bank,  it  includes  the  fol- 
lowing: gold  and  silver  coin,  gold  and  silver  certificates,  and 
gold  clearing-house  certificates. 

The  dictionary  meaning  of  "  specie,"  as  generally  accepted, 
is  metallic  money. 

Specie  Payment.  By  this  is  usually  understood  payment  in 
gold  or  silver,  but  by  reading  the  subject  "  Specie  "  it  will  be 
seen  that  "  specie  payment  "  may  be  considered  to  mean  any 
metallic  money. 

Specie  Point.  Another  term  for  "  Gold  Point,"  to  which 
subject  refer. 

Speculation.  Discounting  future  events.  This  differs 
from  "  investment,"  because  it  has  as  the  direct  object  buying 
in  expectation  of  a  rise  in  value,  or  of  selling  expecting  to 
buy  again  at  a  lower  price  in  time  to  make  delivery,  having 
no  regard  for  the  income-producing  capacity;  whereas  "  in- 
vestment "  considers  the  interest  return  and  safety  of  princi- 
pal as  the  first  object.  One  who  engages  in  "  speculation  " 
is  called  a  "  speculator." 

One  writer  distinguishes  "  speculation  "  from  "  gambling  " 
by  stating  that  the  former  is  a  venture  based  upon  calculation, 
and  the  latter  a  venture  without  calculation,  which  distinction 


368  MONEY    AND    INVESTMENTS 

the  law  recognizes,  sustaining  the  one  and  condemning  the 
other. 

Speculator.    See  "  Speculation." 

Spelter.  This  is  the  commercial  name  for  the  metal  zinc, 
as  turned  out  from  the  smelters.  It  is  customarily  cast  in  slabs 
9  x  18  inches  and  from  1^  to  1£  inches  thick,  weighing  from 
45  to  65  pounds. 

The  term  has  a  parallel  significance  to  "  pig  iron." 

Split.  The  execution  of  an  order  to  sell  by  selling  in  two 
or  more  lots  at  different  prices. 

Split  a  Commission.    Divide  it  with  another. 

Split  Quotation.  In  ordinary  quotations,  the  prices  vary 
by  £;  as,  for  instance,  9£,  9|,  9f,  etc.  A  "  split  quotation  " 
divides  the  £  and  gives  the  quotations  by  1-16;  as,  for  instance, 
9i  9  3-16,  9i,  9  5-16,  etc. 

Spondulacs.  Money.  He  who  has  the  necessary  "  spondu- 
lacs  "  has  the  needed  money.  Formerly  paper  money  was 
meant  by  this  term,  but  now  funds  of  any  kind. 

Spot.  By  "  spot  cotton  "  or  "  spot  wheat,"  or  whatever 
commodity  is  preceded  by  this  adjective,  it  is  understood 
that  such  commodity  is  ready  for  immediate  delivery  as  dis- 
tinguished from  "  futures."  (See  "  Grain.")  A  "  spot  sale  " 
is  a  sale  for  cash  for  immediate  delivery. 

Spot  Cash.  Immediate  cash;  cash  at  once;  cash  on  the 
spot. 

Spot  Grain.    Grain  for  immediate  delivery. 

Spotted.  The  market  was  "  spotted;  "  meaning  that  prices 
were  advancing  at  times,  and  declining  at  times,  or  that 
certain  securities  were  advancing,  and  others  declining,  but  the 
majority  remaining  about  stationary  in  price. 

Spotty.    The  same  thing  as  "  spotted." 

Spread.  (Read  "  Straddle.")  A  "  spread  "  differs  from  a 
"  straddle  "  only  in  that  the  "  put  "  and  "  call  "  prices  are 
not  alike.  A  "  spread  "  on  Illinois  Central  might  read: 

"  For  value  received,  the  bearer  may  deliver  to  me  100 
shares  of  Illinois  Central  at  124  or  call  upon  me  for  100  shares 
of  Illinois  Central  at  126  at  any  time  within  thirty  days  from 
date." 

Then  would  follow  the  time  of  its  expiration  and  the  signa- 
ture. 

Sprinkler  Insurance.  By  this  insurance  the  assured  is 
guaranteed  against  direct  loss  or  damage  caused  by  leakage 
of  water  from  the  sprinkler  system.  Damage  to  the  sprinkler 
equipment  itself  is  not  covered.  The  tank  is  part  of  the 
sprinkler  system.  If  a  tank  bursts  and  the  falling  water 


MONEY    AND    INVESTMENTS  369 

crushes  in  the  roof  of  an  insured  building,  the  roof  is  covered 
by  the  insurance,  but  the  tank  is  not.  Where  heads,  fittings, 
valves,  or  pipes  belonging  to  the  sprinkler  system  break  and 
cause  water  damage,  the  water  damage  is  covered,  but  the 
apparatus  and  any  labour  necessary  to  replace  same  are  not. 

Spurt.  A  sudden  and  considerable  rise  in  prices;  not  a 
jump  of  several  "  points  "  at  a  time,  but  by  more  even  de- 
grees. A  spurt  of  water  does  not  suddenly  appear  at  the  end 
of  the  nozzle  and  the  next  instant  a  hundred  feet  away,  but 
has  to  cover  all  the  intervening  space  to  get  there. 

Squeegee  Agreement.  An  agreement  to  take  back  a  security 
within  a  stated  time  at  a  price  representing  a  definitely  limited 
loss  to  the  one  who  made  the  purchase.  A  transaction  of  this 
kind  is  opposed  to  the  stock  exchange  rules. 

Squeeze.  In  general,  a  squeezing  out  process;  by  which 
many  are  compelled  to  part  with  something,  as  securities  or 
money,  in  order  to  protect  their  interests. 

When  those  who  have  been  selling  short  (see  "  Selling 
Short  ")  are  forced  to  buy  at  losing  prices  in  order  to  fulfil 
their  contracts. 

"  Money  Squeeze;  "  interest  rates  high;  difficult  to  borrow. 

Squeeze  of  Shorts.  To  understand  this  subject,  first  read 
"  Selling  Short  "  and  then  "  Borrowing  Stock."  When  there 
is  a  large  amount  of  stock  being  borrowed  by  numerous  people, 
of  course  the  borrowers  are  known  to  the  lenders;  some  rough 
idea  as  to  the  amount  loaned  is  understood.  We  are  suppos- 
ing all  the  time  that  one  stock  only  is  under  consideration. 
When  there  is  a  great  deal  of  one  kind  of  stock  being  borrowed, 
the  natural  inference  is  that  there  is  a  bear  element  at  work 
to  depress  the  price  of  that  stock.  There  may  be  others  who 
do  not  wish  to  see  that  particular  security  decline  in  price, 
and  who  may,  therefore,  form  a  combination  by  which  they 
prevail  upon  the  lenders  of  it  to  demand  its  return.  As  a 
result,  the  borrowers,  being  notified  to  return  the  stock, 
immediately  seek  for  it  again  elsewhere.  Owing  to  the 
combination  working  against  them,  they  find  a  scarcity  of 
supply,  and  are  obliged  to  actually  purchase  the  stock  in 
order  to  make  delivery.  This  sort  of  a  move  causes  the  simul- 
taneous buying  on  the  part  of  those  who  are  "  short,"  with 
the  result  that  prices  are  suddenly  advanced. 

STA.    The  "  ticker  "  abbreviation  for  "  stamped." 

Stagnation.  Practically  no  business  being  transacted;  busi- 
ness extremely  quiet. 

Stale  Check.  One  which  has  not  been  presented  for  pay- 
ment for  a  considerable  or  unnecessarily  long  time,  after  the 
date  upon  which  it  was  drawn.  A  bank  may  decline  to  pay 


370  MONEY    AND    INVESTMENTS 

such  a  check,  on  the  supposition  that  it  may  have  been  lost, 
and  a  new  one  issued  in  its  place,  or  the  liability  discharged 
in  some  other  way. 

Stamped  Security.  Any  stock,  bond,  or  other  security, 
which,  since  its  original  time  of  issue,  has  been  stamped 
showing  some  new  condition  or  privilege  by  which  it  is  bound, 
or  to  which  it  is  entitled. 

Stamp  Savings  Banks.  A  corporation  formed  to  aid  the 
working  classes  and  school  children  to  save  sums  of  money  too 
small  to  be  deposited  in  a  savings  bank.  Special  stamps  are 
sold  by  the  central  office  to  branch  offices  who  in  turn  sell 
them  to  depositors.  When  a  sufficient  quantity  has  been  saved 
the  money  may  be  withdrawn  and  deposited  in  a  savings 
bank  if  desired. 

No  interest  is  paid  the  holders  of  the  stamps;  any  interest 
that  may  accrue  from  investments  of  the  principal  represent- 
ing the  stamps  being  used  by  the  society  to  help  pay  expenses. 

Out  of  this  system  grew  the  Legal  Trading  Stamp. 

In  England  and  other  European  countries  Government 
stamps  are  used  and  are  honoured  at  special  banks  for  deposit. 

Standard.  The  legal  weight  and  fineness  for  coins;  "  stand- 
ard weight,"  "  standard  fineness."  (See  "  Standard  of 
Weight  and  Fineness.")  One  of  the  best  explanations  of  this 
term  as  used  in  a  system  of  coinage  is  set  forth  in  various  parts 
of  Chevalier's  work  "  On  the  Probable  Fall  in  the  Value  of 
Gold,"  in  this  language: 

"  When  it  is  said  that  such  a  metal  is  the  standard,  it 
means  that  the  monetary  unit  is  a  certain  weight,  settled 
once  for  all,  of  this  metal.  .  .  . 

"  In  a  word,  standard  and  monetary  unit  are  terms  allied 
in  the  closest  manner  to  each  other,  and  they  are  synonymous 
the  one  with  the  other,  as  far  as  the  materials  of  which  a 
thing  is  made  can  be  cpnfounded  with  the  thing  itself.  .  .  . 

"  The  most  rigorously  exact  meaning,  perhaps,  of  the  word 
standard  would  be  to  say  that  it  is  the  monetary  unit,  the 
latter  itself  being  defined  by  the  three  following  conditions: 
the  metal  of  which  it  is  composed,  its  weight,  and  its  fineness." 

Standard  Bullion.  This  is  composed  of  900  parts  of  pure 
gold  or  silver  and  100  parts  of  copper  alloy.  An  ounce  of  pure 
gold  would  have  a  coinage  value  of  $20.671834+,  whereas 
the  coinage  value  of  a  standard  ounce  of  gold  is  $18.60465. 
The  coinage  value  in  standard  dollars  of  an  ounce  of  pure 
silver  is  $1.2929-1- and  of  an  ounce  of  standard  silver  $1.1636. 

Standard  of  Value.1    By  an  Act  of  Congress  April  2,  1792, 

1  Jevons  defines  this  as  some  uniform  unchangeable  substance  chosen, 
in  terms  of  which  all  ratios  of  exchange  may  be  expressed  and  calculated, 


MONEY    AND    INVESTMENTS  371 

passed  upon  the  recommendation  of  Alexander  Hamilton, 
there  was  established  a  "  standard  of  value  "  between  gold 
and  silver  at  the  ratio  of  15  to  1;  i.  e.  the  value  of  15  ounces  of 
fine  silver  was  declared  to  be  equal  in  value  to  an  ounce  of 
fine  gold.  It  very  soon  became  apparent  that  this  ratio  was 
not  proper,  as  it  undervalued  gold;  therefore,  in  1834,  the 
ratio  was  changed  to  16.002  to  1,  and  in  1837  it  was  changed 
to  15.988  to  1,  which  is  the  present  ratio;  usually  referred  to 
as  16  to  1.  From  1792  to  1834  values  in  this  country  were 
measured  by  silver,  but  since  the  latter  date  gold  has  been 
the  only  standard  of  value  in  actual  practice.  Troy  weights 
are  used  to  determine  weights  of  both  gold  and  silver. 
All  the  principal  nations  have  the  gold  standard.  Over  three 
fourths  of  international  commerce  is  fixed  upon  this  standard, 
even  though  many  countries  have  not  adopted  it.1 

Standard  of  Weight  and  Fineness.  The  proportion  by  weight 
of  pure  metal  in  coins  to  the  alloy  is  the  "  fineness."  In  the 
United  States  it  is  900  parts  by  weight  to  100  parts  of  alloy 
in  both  gold  and  silver.  The  weight  of  a  gold  dollar  is  25.8 
grains  and  a  silver  dollar  412.5  grains.  The  "  present  standard 
of  weight  and  fineness  "  in  this  country,  therefore,  provides 
for  gold  and  silver  dollars  as  above. 

Our  unit  of  weight  was  obtained  from  England,  is  of  bronze, 
and  weighs  5,760  grains,  or  one  pound  troy.  It  is  in  safe 
keeping  at  the  Philadelphia  Mint.  Each  year  an  assay  com- 
mission appointed  by  the  President  compares  the  working 
copies  of  the  weight  with  the  original. 

The  weight  and  fineness  of  the  United  Kingdom  of  Great 
Britain  and  Ireland  (Act  fifty-six  George  the  Third,  chapter 
sixty-eight)  provides  that  there  should  be  nine  hundred  and 
thirty-four  sovereigns  and  one  ten  shilling  piece  contained  in 
twenty  pounds  weight  troy  of  standard  gold,  of  the  fineness 
at  the  trial  of  the  same  of  twenty-two  carats  fine  gold  and 
two  carats  of  alloy  in  the  pound  weight  troy;  and,  further, 
as  regards  silver  coins,  that  there  should  be  sixty-six  shillings 

without  any  regard  whatever  to  the  feelings  or  mental  phenomena  which 
the  commodities  produce  in  men.  And  "  that  the  standard  unit  of  value 
is  some  entirely  arbitrary  weight  of  the  standard  metal,  the  exact  amount 
of  which,  being  a  matter  of  indifference  on  general  ground,  should  be  fixed 
as  seems  most  convenient  in  reference  to  the  habits  of  the  nations  or  other 
accidental  circumstances." 

1  The  Act  of  Congress,  March  14,  1900,  commonly  known  as  the  "  Finan- 
cial Bill,"  declares  "  that  the  dollar  consisting  of  twenty-five  and  eight- 
tenths  grains  of  gold  nine-tenths  fine,  as  established  by  section  thirty-five  hun- 
dred and  eleven  of  the  Revised  Statutes  of  the  United  States,  shall  be  the 
standard  unit  of  value,  and  all  forms  of  money  issued  or  coined  by  the  United 
States  shall  be  maintained  at  a  parity  of  value  with  this  standard,  and  it 
shall  be  the  duty  of  the  Secretary  of  the  Treasury  to  maintain  such  a 
parity." 


372  MONEY    AND    INVESTMENTS 

in  every  pound  troy  of  standard  silver  of  the  fineness  of 
eleven  ounces  two  pennyweights  of  fine  silver  and  eighteen 
pennyweights  of  alloy  in  every  pound  weight  troy.1 

Standard  Oil  Influence.  Perhaps  no  better  impression  of  this 
can  be  conveyed  than  by  the  following,  which  appeared  in  one 
of  our  daily  papers:2 

"  The  election  of  H.  H.  Rogers  to  the  Atchison  board  of 
directors  renders  interestingthelist  of  railroads  inwhich  Stand- 
ard Oil  influence  is  openly  recognized: 

Mileage 

Atchison  8,003 

Baltimore  &  Ohio  4,397 

Chicago  &  Alton  915 

Chicago,  Milwaukee  &  St.  Paul  6,682 

Chicago  &  Northwestern  7,365 

Rock  Island  system  16,000 

Delaware,  Lackawanna  &  Western  947 

Delaware  &  Hudson  824 

Denver  &  Rio  Grande  2,460 

Erie  2,556 

Illinois  Central  4,301 

Kansas  City  Southern  839 

Missouri,  Kansas  &  Texas  2,713 

Missouri  Pacific  system  20,000 

New  York  Central  11,178 

New  York,  New  Haven  &  Hartford  2,037 

New  York,  Ontario  &  Western  549 

Northern  Securities  18,920 

Oregon  Railroad  &  Navigation  1,151 

Oregon  Short  Line  1,823 

Reading  2,144 

Southern  Pacific  9,621 

Union  Pacific  6,105 


Total  131,530 

"  This  list  does  not  include  the  24  industrial  corporations, 
among  others  Amalgamated  Copper,  Consolidated  Gas, 
United  States  Steel,  Western  Union  Telegraph,  United  States 
Realty,  Colorado  Fuel,  and  Linseed  Oil  —  in  which  similar 
representation  or  control  is  exercised,  nor  the  14  banks  and 
14  trust  companies  in  which  the  recognized  representatives 
of  the  '  Standard  Oil  group  '  have  seats  as  directors." 

Standard  Silver  Dollars.  In  the  United  States  these  "  are 
legal  tender  at  their  nominal  or  face  value  in  payment  of  all 
debts,  public  and  private,  without  regard  to  the  amount, 
except  where  otherwise  expressly  stipulated  in  the  contract." 
Issued  by  the  Treasurer  and  assistant  treasurers  of  the  United 

1  The  Coinage  Act,  1870. 

2  The    author   does    not    guarantee    the    infallibility    of   this,    but, 
whether  or  no  it  is  correct  in  all  its  details,  it  gives  a  general  idea  of  the 
prevailing  belief  as  to  the  magnitude  of  the  "  Standard  Oil  influence." 


MONEY    AND    INVESTMENTS  373 

States  in  redemption  of  silver  certificates  and  Treasury  notes 
of  1890;  sent,  express  paid,  by  the  Government,  in  sums  of 
$500  or  any  multiple  thereof,  for  silver  certificates  or  treasury 
notes  of  1890  deposited  with  the  Treasurer  or  any  assistant 
treasurer.1 

A  dollar  such  as  the  above  contains  412£  grains  of  standard 
silver,  .900  fine,  which  is  equivalent  to  371-^  fine  grains  of  silver, 
balance  being  copper  alloy  to  the  amount  of  41  £  grains. 
Since  February  28,  1878,  when  the  coinage  of  standard  silver 
dollars  was  restored  by  act  of  Congress,  the  total  amount 
coined  up  to  December  31,  1904,  was  $570,272,610. 

Standard  Stocks  (or  Standard  Investments).  Well  known 
securities,  of  established  reputation,  in  which  confidence  is 
felt  as  to  the  future  payment  of  interest  or  dividends,  and 
of  the  principal,  if  redeemable;  stocks  which  are  sought  as 
conservative  investments. 

State  Banks.  Formerly  "  State  banks  "  issued  bank  notes, 
but  in  1865  Congress  passed  a  law  taxing  these  notes  10%, 
which  speedily  resulted  in  their  retirement.2  Since  that  time, 
in  other  respects,  they  have  performed  about  the  same  func- 
tions as  national  banks.  As  a  class  they  have  very  largely 
disappeared  in  the  East,  but  are  more  frequent  in  other 
sections  of  the  country.  Fiske  writing  in  1903  said  that  these 
institutions  outnumbered  the  national  banks  in  the  country. 
State  banks  are  under  the  regulation  of  the  State  in  which 
they  are  located. 

State  Bonds.  An  obligation  in  the  form  of  a  bond  issued  by 
a  State,  the  payment  of  which  must  be  accomplished  through 
the  collection  of  taxes  assessed  upon  the  taxable  property 
embraced  within  its  corporate  limits. 

Some  State  issues  have  valuable  assets  in  the  shape  of 
income-producing  property,  which  contribute  towards  the 
payment  of  the  principal  and  interest  of  its  obligations; 
such,  for  instance,  are  the  large  income-producing  State-owned 
wharves  and  docks  in  San  Francisco. 

Again,  an  indebtedness  of  this  nature  may  be  incurred  for 
some  improvement  more  or  less  local  in  its  nature,  the  par- 
ticular section  benefited  being  primarily  responsible  for  the 

1  The  .difficulty  experienced  in  keeping  silver  dollars  in  circulation  is 
shown  by  the  following  excerpt  from  the  Report  of  the  Secretary  of  the 
Treasury  for  1905:  "  The  silver  dollars  in  circulation  June  30,  1898,  were 
$58,482,966.  The  amount  of  this  coin  distributed  at  Government  expense 
for  transportation,  from  July  1,  1898,  to  June  30,  1905,  was  $275,536,512, 
but  the  amount  in  circulation  on  the  latter  date  was  only  $73,584,336. 

3  As  one  writer  declares:  "  The  State  institutions,  however,  were  so  far 
from  the  direct  control  of  the  central  Government  that  the  currency  and 
finances  in  the  country  were  left  in  a  state  of  uncertainty  which  paralyzed 
industries,  seriously  handicapping  private  as  well  as  public  transactions. 


374 

liquidation  of  the  debt,  for  which,  nevertheless,  the  State  has 
obligated  itself  for  payment.  An  example  being  bonds  issued 
by  the  Commonwealth  of  Massachusetts  for  the  benefit  of  the 
Metropolitan  Water  District. 

The  interest  return  from  most  of  our  State  securities  is  not 
large,  and,  consequently,  their  purchase  is  more  or  less  limited 
to  institutions  such  as  insurance  companies  and  savings 
banks,  or  to  trustees  of  estates,  or  to  those  seeking  a  par- 
ticularly conservative  form  of  investment,  and  who  can 
afford  the  low  rate  of  interest. 

The  past  record  of  "  State  bonds  "  has  not  been  a  very 
happy  one.  Many  of  the  issues  have  entailed  great  losses 
upon  the  holders.  These  debts,  however,  were  incurred  under 
different  conditions  than  at  present  existing,  and  there  is  not 
to-day  any  reason  to  believe  that  any  of  our  State  issues  of 
recent  date  are  anything  but  safe  holdings. 

The  fact  that  States  cannot  be  sued  by  an  individual  is  a 
point  which  has  always  deterred  some  investors  from  placing 
money  in  securities  of  that  kind. 

State  Street.  Financial  Boston;  meaning  not  only  that 
section  where  matters  of  finance  are  transacted  (not  literally 
State  Street  itself),  but  also  the  men  engaged  in  the  manage- 
ment of  such  matters. 

Steady.  The  stock  market  is,  or  prices  are,  said  to  be 
steady,  when  there  are  few  and  small  variations  in  prices; 
an  even  tone  existing. 

Steamship  Company  Bonds.  The  average  investor  has  not 
had  the  opportunity  to  familiarize  himself  with  this  class  of 
investments,  owing  to  the  somewhat  infrequency  of  these 
issues  appearing  upon  the  market.  One  very  notable  example 
is  that  of  the  International  Mercantile  Marine  Co. 

To  safeguard  an  issue  of  bonds  on  vessel  property,  it  is 
better  that  the  ships  should  be  comparatively  new;  otherwise 
a  careful  appraisement  of  their  value  should  be  obtained,  and, 
in  any  event,  if  the  mortgage  is  to  cover  the  vessels  only,  with- 
out other  property  or  guaranty,  the  bonded  debt  should  not 
much  exceed  50%  of  the  valuation.  Owing  to  the  rapid 
depreciation  of  steamships,  the  mortgage  should  provide  for 
some  method  of  reducing  the  debt  —  either  by  a  well-pro- 
tected sinking  fund  or  direct  redemption  of  the  bonjds  —  at 
a  rate  of,  say,  one  tenth  of  the  total  issue  annually,  beginning 
one  or  two  years  from  its  date.  The  trustee  of  the  mortgage 
should  be  required  to  cause  the  property  at  all  times  during 
the  life  of  the  bonds  to  be  properly  insured  in  good  companies, 
against  all  risks  on  vessel  property  ordinarily  covered  by  such 
insurance,  to  the  full  insurable  value  of  the  ships;  such  insur- 
ance to  be  made  with  loss  payable  to  the  trustee,  and  the 


MONEY    AND    INVESTMENTS  375 

policies  deposited  with  it.  It  should  further  provide  that  any 
money  received  by  the  trustee  on  account  of  destruction  of 
the  property  mortgaged  should  either  be  used  to  replace  the 
property  destroyed,  in  proportion  to  the  insured  value  of  the 
same  —  the  steamship  company  paying  the  difference  —  or 
if  not  so  used  or  arranged  to  be  used,  at  the  end  of  a  given 
time  —  say  six  months  —  to  be  divided  in  some  equitable 
way  among  the  bondholders;  perhaps  added  to  the  sinking 
fund,  if  any. 

It  is  a  point  in  favour  of  "  steamship  company  bonds  "  that 
the  steamship  line  is  not  usually  confined  to  any  given  terri- 
tory or  section.  If  a  certain  line  of  sailing  or  business  proves 
unprofitable,  the  boats  may  be  changed  to  another  line  of 
ports,  or  another  class  of  business,  or  nearly  always  be  sold 
at  a  fair  valuation.  You  cannot  economically  remove  railway, 
manufacturing,  or  other  similar  properties  from  one  section 
of  the  country  to  another,  if  they  prove  unprofitable  where 
located,  whereas,  of  course,  the  sailing  of  a  line  of  boats  may 
usually  be  changed  at  will. 

"  The  liability  of  the  owner  of  a  vessel  for  loss  or  damage 
to  another  vessel  or  to  the  cargo  of  either  vessel,  happening 
through  errors  in  navigation  or  management,  or  from  perils 
of  the  sea,  but  without  his  knowledge  or  privity,  is  limited 
to  the  value  of  his  vessel,  and  the  freight  then  earned,  in  the 
condition  in  which  it  is  after  the  happening  of  the  loss  or 
accident. 

"  The  owner  is  also  not  liable  for  loss  or  damage  by  fire  to 
the  cargo  carried  in  his  own  vessel  unless  caused  by  his  own 
neglect. 

"  If  an  owner  exercises  due  diligence  to  make  his  vessel 
seaworthy  and  to  see  that  she  is  properly  manned  and 
equipped,  neither  he  nor  his  vessel  is  liable  for  loss  or  damage 
to  the  cargo  carried,  from  errors  of  navigation  or  management, 
or  from  dangers  of  the  sea. 

"  The  owner  may  relieve  himself  of  all  liability  by  trans- 
ferring all  his  interest  in  the  vessel  and  the  freight  then  pending 
to  a  trustee  for  all  claimants. 

"  It  follows  that  the  owner  is  not  personally  liable  if  his 
vessel  becomes  a  total  wreck. 

"  Insurance  on  the  vessel,  recovered  by  the  owner,  is  no 
part  of  the  owner's  interest  in  the  vessel,  and  is  not  liable  to  be 
taken  to  pay  for  the  loss  or  damage. 

"  The  owner  of  a  vessel  is  of  course  personally  liable,  with- 
out limitation,  if  the  loss  is  attributal  to  his  own  fault  or 
negligence. 

"  In  case  of  a  corporation,  the  '  knowledge  and  privity  ' 
which  would  make  it  liable  must  be  the  knowledge  and  privity 


376  MONEY    AND    INVESTMENTS 

of  its  officers  or  managers,  and  not  of  the  masters  of  its 
vessels." 

Steel.     United  States  Steel  Corporation. 

Sterling  (or  Sterling  Exchange).  "  Exchange  "  (to  which 
refer)  on  Great  Britain. 

"  Sterling  at  Paris  25.21."  This  means  that  twenty-five 
francs  and  twenty-one  centimes,  French  money,  was  the 
equivalent  in  value,  at  the  time  of  quotation,  in  English 
money,  to  the  "  pound  sterling,"  and  that  a  purchaser  in 
Paris  of  a  "  bill  of  exchange  "  on  London  would  pay  for  it  at 
the  rate  of  twenty-five  francs  and  twenty-one  centimes  for 
each  "  pound  sterling."  Similar  quotations  in  other  financial 
centres,  as  "  Berlin,  20.49£  "  would  mean  the  value  in  Ger- 
man money  of  the  English  "  pound  sterling  "  for  exchange 
purposes. 

"  Sterling  "  is  very  generally  used  in  reference  to  English 
money,  as,  for  instance,  3£  million  sterling,  meaning  3,500,000 
"  pounds  sterling."  The  English  say  "  pounds  "  or  "  ster- 
ling "  when  referring  to  their  money,  whereas  we  say  "  dollars  " 
in  speaking  of  our  own. 

It  is  the  common  term  for  the  money  of  Great  Britain  in 
whatever  form,  including  its  own  standard  bars  of  silver  or 
gold. 

Sterling  Bill.  "  Exchange  "  payable  in  English  money, 
(See  last  subject.) 

Sterling  Bond.    See  next  subject. 

Sterling  Loan.  Bonds,  or  other  forms  of  indebtedness,  pay- 
able in  English  money;  i.  e.  pounds  sterling.  Also  loans 
made  on  "  sterling  (which  see)  bills  "  of  exchange. 

Bills  payable,  say,  at  sixty  days'  sight,  are  drawn  by  the 
American  banker  on  London.  These  are  negotiated  either  by 
the  banker  or  the  borrower,  the  latter,  in  any  event,  getting 
the  proceeds.  Suppose,  at  the  time  when  the  bill  is  drawn, 
the  net  rate  of  exchange  is  $4.85  for  the  "  pound,"  then  a 
"  sterling  loan  "  for  £10,000  would  cost  $48,500.  Deduct 
from  this  the  banker's  commission  of  perhaps  one  half  of  one 
per  cent.  —  $242.50,  leaving  net  amount  paid  to  the  borrower 
$48,257.50.  At  the  end  of  sixty  days  the  loan  will  have  to 
be  paid  on  the  basis  of  the  rate  of  demand  "  sterling  exchange  " 
then  ruling,  which,  in  this  suppositional  case,  we  will  figure 
at  $4.885,  making  the  amount  due  $48,850,  and  subtracting 
from  this  the  original  amount  of  $48,257.50  we  have  left 
$592.50,  which  is  the  interest  paid  for  the  use  of  the  money 
for  sixty  days,  or  at  about  the  rate  of  4£%  yearly. 

"  Sterling  loans  "  differ  from  "  foreign  loans  "  in  that  the 
former  are  almost  exclusively  drawn  upon  London. 


MONEY    AND    INVESTMENTS  377 

Stiffened.     Advanced;  prices  "  stiffen  "  when  they  rise. 

Stock.  The  property  of  any  corporation  is  divided  into 
various  parts  or  shares  called  "  stock."  (See  also  "  Shares.") 

There  is  a  peculiar  feature  attached  to  what  is  referred  to 
as  a  "  stock  "  in  Great  Britain;  namely,  that  it  can  be  dealt 
in  and  transferred  in  multiples  of  one  pound,  and  sometimes 
even  less,  and,  in  this  way,  it  differs  from  what  they  term 
"  shares,"  as  they  are  dealt  in  according  to  their  specific  de- 
nominations. It  may  be  taken  as  a  general  rule  that  most 
British  railway  issues  are  in  the  form  of  "  stocks,"  not 
"  shares." 

The  English  have  a  way  of  referring  to  their  municipal 
bond  issues  as  "  corporation  stock,"  using  "  stock  "  as  the 
equivalent  of  our  "  bond  "  at  such  times.  What  we  call  a 
"  corporation  "  they  call  a  "  company." 

Stock  Bills.  Bills  of  exchange  (see  "  Exchange  ")  drawn 
against  a  shipment  of  investment  securities;  stocks. 

Stock  Certificate.  The  ownership  of  "  stock  "  (read  last 
paragraph)  is  represented  by  a  printed,  lithographed,  or  en- 
graved1 form,  properly  filled  in,  sealed  and  signed  by  the 
proper  officers,  giving  the  owner's  name  and  number  of  shares 
of  the  stock  it  represents.  This  is  a  "  stock  certificate  "  and 
is  the  rightful  possessor's  evidence  of  ownership  in  the  prop- 
erty of  the  corporation.  (Read  "  Transfer  of  Stock.") 

Stock  Company.  A  corporation,  the  ownership  of  which  is 
represented  by  shares  of  stock.  (See  "  Corppration.") 

Stock  Dividend.  Issuing  new  stock  pro  rata  to  those  already 
holding  stock  of  the  same  company;  the  new  stock  to  be  the 
equivalent  of  profits  earned  by  the  corporation  which  are  to 
be  retained  as  additional  capital  rather  than  to  be  paid  to 
stockholders  as  a  cash  dividend.  For  example:  a  company 
of  $500,000  capital  stock  has  gradually  accumulated  $100,000 
in  profits  —  very  likely  having  paid  reasonable  dividends  in 
the  meantime  —  and  finding  its  business  of  sufficient  magni- 
tude to  warrant  the  retaining  of  the  $100,000  for  use  in  carry- 
ing on  its  affairs,  and,  at  the  same  time,  wishing  to  satisfy  the 
stockholders,  who,  perhaps,  had  been  asking  for  its  division, 
decides  to  issue  $100,000  in  new  stock,  making  a  total  capital 
of  $600,000.  Of  course  the  $100,000  "  profits  "  on  the  books 
of  the  company  disappear  under  that  heading,  but  "  capital  " 
account  is  increased  that  much.  By  this  method,  the  $100,000 
capital  stock  becomes  fully  paid,  for  had  the  amount  been 
paid  out  to  the  stockholders  as  a  dividend,  and  they,  in  turn, 

1  A  security  to  be  dealt  in  on  the  principal  stock  exchanges  of  the  world 
must  be  engraved,  consequently  blank  stock  certificates  are,  generally, 
engraved 


378  MONEY    AND    INVESTMENTS 

paid  it  back  in  to  the  company  for  new  stock,  the  same  result 
would  have  been  accomplished. 

Supposing  the  par  value  of  each  original  share  to  be  $100, 
then,  as  $100,000  is  one  fifth  of  $500,000,  each  holder  of  five 
shares  of  original  stock  would  receive,  without  cost,  one  share 
of  new  stock,  and  a  "  stock  dividend  "  would  have  been 
declared.  One  of  the  most  notable  examples  of  the  declaration 
of  "  stock  dividends  "  has  been  that  of  the  Pullman  Co. 

The  recipient  of  a  stock  dividend  must  not  consider  himself 
richer  than  before,  although  the  market  quotations  of  the 
stock  may  appear  to  make  him  so.  His  ownership  in  the 
corporation  is  no  greater,  as  his  proportionate  interest  in 
the  entire  capital  is  the  same  as  previous  to  the  declaration 
of  the  stock  dividend. 

Stock  Exchange.  It  seems  almost  unnecessary  to  treat  to 
any  extent  upon  this  subject.  Some  information  will  be 
found  under  the  next  heading.  However,  it  may  not  be  out 
of  place  to  say  that  the  first  definite  organization  in  America 
which  may  be  recognized  as  an  exchange  of  this  kind  was 
brought  about  by  a  board  of  stock  brokers  in  Philadelphia, 
who  met,  organized,  and  adopted  a  constitution  early  in  the 
18th  century.  Medberry  makes  the  statement  that  upon 
May  17,  1792,  some  twenty  New  York  dealers  in  public  stock 
met  together  and  signed  a  paper  of  the  nature  of  a  protective 
league.  The  New  York  Stock  Exchange  was  organized  in 
1817.  The  above  few  facts  are  given  to  show  that  the  idea 
of  a  "  stock  exchange  "  is  an  old  one,  and  that  the  stock 
brokers,  so-called,  have  existed  for  many  years.  In  fact, 
Nelson  states  that  as  early  as  1285,  in  England,  the  term 
"  broker  "  is  referred  to  in  an  act  of  Parliament. 

A  "  stock  exchange,"  as  generally  understood,  need  not 
necessarily  be  a  building  where  securities  are  bought  and 
sold,  but  any  place,  even  in  the  open  air,  as,  for  instance, 
"  curb  "  stock  exchanges. 

The  Century  Dictionary  defines  a  "  stock  exchange  "  as 
"  An  association  of  brokers  and  dealers  or  jobbers  in  stocks, 
bonds,  and  other  securities,  created  under  State  or  municipal 
authority,  or  by  corporations  concerned  in  the  business  con- 
nected with  the  carrying  on  of  railways,  mines,  manufactures, 
banks,  or  other  commercial  or  industrial  pursuits." 

As  a  matter  of  fact,  in  any  of  the  largest  cities  where  trans- 
actions such  as  above  are  carried  on,  a  portion  or  all  of  some 
building  is  occupied  for  the  purpose. 

It  is  said  that  a  "  stock  exchange  "  offers  the  most  highly 
organized  and  delicately  adjusted  market  in  the  world.1 
(See  "  Stock  Exchange  Seat.") 

*The  New  York  Supreme  Court  has  handed  down  a  decision  as  follows: 


MONEY    AND    INVESTMENTS  379 

Stock  Exchange  Clearing-House.  This  system  for  simplify- 
ing the  deliveries  of  securities  sold  between  members  of  a 
stock  exchange  resulted  from  the  large  over-certification  of 
checks  which  the  former  system  of  actual  deliveries  to  each 
different  broker  required.1 

Pratt  declares  that  the  New  York  stock  business  of  1901 
could  not  have  been  transacted  without  the  assistance  of  the 
clearing-house  machinery.  On  May  6,  1901,  "  the  shares 
cleared  both  sides  amounted  to  13,313,800,  having  a  value 
of  $1,132,200,000.  .  .  .  The  bank  certifications  obviated 
amounted  to  $286,100,000." 

The  New  York  Stock  Exchange  adopted  this  system  in 
1892.  There  had  been,  however,  a  stock  clearing  system  in 
successful  operation  in  several  European  cities  for  some  years. 
Philadelphia  and  Boston  had  already  adopted  it  before  the 
idea  went  into  effect  in  New  York. 

The  European  system  is  based  on  the  "  fortnightly  settle- 
ment "  plan,  whereas  the  New  York  system  is  based  on  daily 
deliveries. 

To  follow  an  actual  transaction  through  the  clearing-house 
would  consume  more  space  than  can  be  here  allotted.  In 
effect,  however,  at  the  close  of  a  day's  business  each  stock 
exchange  member  delivers  a  sheet  —  "  clearance  sheet  "  — 
on  which  is  recorded  his  sales  and  purchases  of  certain  securi- 
ties; i.  e.  the  active  ones.  It  is  the  duty  of  the  clearing-house 
to  reconcile  all  deliveries  between  different  parties  and  to 
adjust  the  cash  differences  by  either  paying  or  receiving  the 
balances  due,  so  that  as  little  money  may  be  required  in  the 
settlement  as  possible. 

One  very  important  function  of  this  clearing-house  system 
is  to  facilitate  the  borrowing  of  money  on  the  stock  exchange. 
To  understand  this  thoroughly,  a  reading  of  the  subject 
"  Borrowing  Stock  "  is  advisable.  By  way  of  illustration, 
Poole  &  Co.  buy  500  shares  of  Labrador  &  Florida  at  100. 
In  the  ordinary  course  of  business  they  would  be  obliged  to 
pay  the  next  day,  say,  $50,000,  to  take  up  this  stock,  and  then 
make  a  loan  with  their  bank,  furnishing  20%  margin,  neces- 
sitating a  cash  outlay  on  their  part  of  about  $10,000.  Instead 
of  making  this  loan,  however,  they,  in  turn,  loan  these  500 
shares  of  stock  to  Baldwin  &  Co.  at  an  agreed  rate  of  interest, 
and  the  next  day  the  clearing-house  just  offsets.  In  other 

Justice  O'Gorman  said,  "  Stock  exchanges  have  the  power  to  enact  such 
rules  and  regulations  concerning  the  government  of  their  affairs  as  may 
be  deemed  necessary  for  the  carrying  on  of  their  business,  but  such  rules 
and  regulations  must  not  be  contrary  to  the  law  of  the  land." 

1  "  The  first  official  stock  exchange  clearing-house  was  founded  at  Frank- 
fort in  May,  1867."  —  "  The  Principles  of  Money  and  Banking,"  Charles 
A.  Conant. 


380  MONEY    AND    INVESTMENTS 

words,  no  money  changes  hands  in  this  transaction,  and 
Poole  &  Co.  are  saved  the  necessity  of  first  paying  for  the  500 
shares  of  stock  previous  to  loaning  to  Baldwin  &  Co. 

In  the  words  of  the  committee  which  reported  upon  the 
advisability  of  establishing  a  clearing-house  in  the  New  York 
Exchange: 

"  The  party  who  is  '  even  '  in  a  stock  has  then  nothing  to 
receive  or  deliver,  and  all  the  contracts  are  closed.  The  com- 
mittee in  charge  of  the  clearing  ascertain  who  has  a  balance 
of  a  stock  to  deliver,  and  also  who  has  a  balance  to  receive, 
and  then  order  the  former  to  deliver  direct  to  the  latter, 
thereby  relieving  from  deliveries  all  intermediate  parties  who 
are  '  even  '  in  the  stock." 

There  is  a  "  delivery  price  "  fixed  each  day  for  each  stock, 
and  in  assigning  the  receipts  or  deliveries  the  clearing-house 
bases  its  reckoning  upon  the  delivery  price,  usually  being  the 
even  price  which  most  closely  approximates  the  last  sale  of 
the  day  for  the  stock  in  question. 

A  charge  of  2£c.  is  made  for  clearing  each  100  shares  of 
stock  of  $100  par  value. 

Only  100  share  lots,  or  multiples  of  the  same,  are  cleared; 
and  bonds  only  on  special  occasions. 

As  the  foregoing  gives  but  the  merest  idea  of  the  workings 
of  this  very  valuable  time-saving  institution,  the  writer  sug- 
gests, for  the  benefit  of  those  who  wish  more  detail  and  com- 
plete information  upon  the  subject,  a  reference  to  the  "  Work 
of  Wall  Street,"  by  S.  S.  Pratt,  who  very  ably  devotes  a 
chapter  to  the  subject. 

Stock  Exchange  Collateral.  (Read  "  Collateral.")  Col- 
lateral security  which  is  dealt  in  upon  the  particular  stock 
exchange  to  which  reference  is  had,  as,  for  instance,  any  New 
York  Stock  Exchange  collateral  would  mean  securities  dealt 
in  upon  the  stock  exchange  of  that  city. 

Stock  Exchange  Seat.  In  order  to  possess  the  right  to  buy 
or  sell  securities  upon  a  stock  exchange,  one  must  be  a  duly 
elected  member  of  the  same,  pay  his  initiation  fee,  and  share 
in  the  assets  and  liabilities  of  the  exchange.  His  interest, 
instead  of  being  called  a  share  of  stock,  is  called  a  "  seat." 
A  "  seat  "  may  be,  as  in  the  case  of  the  New  York  Stock 
Exchange,  very  valuable,1  but  varying  in  price,  in  accordance 
with  the  activity  of  the  exchange;  that  is,  the  amount  of 

1  Up  to  Nov.  1,  1906,  the  record  price  .on  the  New  York  Exchange  was 
$95,000;  but  in  1871  the  quotation  was  as  low  as  $2,750,  and  in  1896  down 
to  $13,000.  Up  to  the  present  time  —  January  1,  1907  —  the  price  on  the 
Boston  Exchange  is  $37,500.  The  initiation  fee  upon  the  former  is  $2,000 
the  latter  $500.  Unless  for  some  reason  an  exchange  increases  its  number, 
of  members,  a  "  seat  "  must  be  purchased  from  some  member  who  is  willing 
to  sell,  or  from  an  insolvent,  or  the  estate  of  a  deceased  member. 


MONEY    AND    INVESTMENTS  381 

business  being  transacted;  which  naturally  affects  the  de- 
mand. The  owner  of  a  "  stock  exchange  seat  "  may  transfer 
or  sell  to  another  person  by  permission  of  the  proper  authori- 
ties of  the  exchange.  The  owner  of  the  "  seat  "  has  no  right, 
in  any  way,  to  charge  commissions  for  the  sale  or  purchase  of 
securities,  otherwise  than  in  accordance  with  the  established 
rules  of  the  exchange;  rates  are  less  between  members 
than  for  others;  for  instance,  John  Smith  owns  a  "seat," 
but  does  not  wish  to  actually  go  upon  the  "  floor,"  as  it  is 
called,  of  the  exchange,  to  personally  buy  or  sell  securi- 
ties; he  may  employ  some  other  member  to  act  for  him  to 
whom  he  pays  a  reduced  commission  amounting  to  $200  for  100 
shares.  From  this  arises  the  term  "  two  dollar  man." 

Stockholder.  The  owner  of  one  or  more  shares  of  stock  in  an 
incorporated  company.  In  the  eyes  of  the  law,  the  legal  stock- 
holder is  the  one  whose  name  appears  upon  the  records  of  a 
corporation  as  the  owner  of  one  or  more  shares  of  its  capital 
stock,  regardless  of  whether,  or  no,  such  a  person  may  have 
parted  with  his  stock  by  signing  the  same  in  blank,  without 
taking  the  necessary  precaution  of  having  his  original  certif- 
icate of  stock  cancelled,  and  a  new  one  issued  in  its  place  to  the 
purchasing  party. 

Stock  Interest  Certificates.  See  "  Stock  Trust  Certificates," 
for  all  practical  purposes  the  same. 

Stock-jobber.  A  speculator;  one  who  cares  not  for  the 
disasters  he  may  cause  others,  so  long  as  he  forces  the  prices 
of  securities  up  or  down  for  his  own  gain;  one  who  issues 
securities  upon  a  corporation  far  in  excess  of  the  actual  value 
of  the  property  of  the  corporation;  watered  stock,  so-called. 
London  has  a  different  meaning  for  this  term,  as  given  under 
"  Jobber." 

Stock- Jobbing.  The  use  of  this  term  in  London  will  be 
understood  by  reading  the  subject  "  Jobber."  With  us 
"  stock-jobbing  "  has  reference  to  the  use  of  unsavoury  methods 
for  varying  the  prices  of  stocks. 

Stock  Kiting.     See  "  Kiting." 

Stock  Savings  Banks.  Explained  under  "  Mutual  Savings 
Banks." 

Stock  Transfer.     See  "  Transfer  of  Stock." 

Stock  Transfer  Tax.     See  "  Taxes  on  Stock  Transfers." 

Stock  Trust  Certificates.  In  August,  1902,  the  St.  Louis  and 
San  Francisco  R.  R.  Co.  secured  control  of  the  stock  of  the 
Chicago  and  Eastern  Illinois  R.  R.  Co.,  by  exchanging,  on  the 
basis  of  equal  par  value,  certificates  calling  for  fixed  dividends, 
with  other  conditions.  These  certificates  bear  the  name  of  the 


382  MONEY    AND    INVESTMENTS 

St.  Louis  and  San  Francisco  Co.,  but  as  they  represent  its 
ownership  in  another  company  whose  shares  are  held  in  trust, 
as  it  were,  they  are  called  "  stock  trust  certificates."  Certif- 
icates of  this  nature,  sometimes  known  simply  as  "  trust 
certificates,"  are  occasionally  issued  representing  the  stock 
certificates  of  numerous  stockholders  in  a  corporation  who 
wish  to  "  pool  "  their  ownings  for  the  purpose  of  control. 
A  trustee  is  appointed  to  hold  the  stock  and  generally  to 
exercise  certain  rights  vested  in  him  by  what  is  known  as  the 
"  trust  agreement." 

Stock  Watering.    See  "  Watered  Stock." 

Stock  Yards.  Chicago  Junction  Railways  &  Union  Stock 
Yards  Co. 

Stop  Loss  Orders.  Sometimes  called  "stop  orders."  A 
method  of  limiting  one's  losses,  particularly  in  dealing  in 
stock  exchange  securities;  for  example,  suppose  A  owns  100 
shares  of  a  certain  stock  costing  $90  per  share.  He  anticipates 
and  hopes  that  it  will  advance  in  price,  at  the  same  time,  the 
market  conditions  are  such  that  it  is  possible  a  sudden  decline 
may  take  place.  Being  willing  to  hold  the  stock,  in  case  of  a 
small  drop,  with  the  expectation  that  it  may  shortly  recover, 
but  not  wishing  to  hold  the  stock  for  a  great  decline,  say  to 
below  80,  a  "  stop  loss  order  "  is  given  by  A  to  his  broker. 
This  means  that  if  the  stock  declines  to  a  point  where  its  sale 
takes  place  at  80,  or  even  if  the  last  sale  is  above  this  figure, 
and  a  broker  offers  some  of  the  same  stock  for  sale  at  80,  the 
"  stop  loss  order  "  goes  into  effect,  and  the  broker  holding  the 
same  must  not  wait  for  a  bid,  but  offer  the  customer's  stock  at, 
say,  79£,  and  so  on  down  until  a  purchaser  is  obtained.  In 
other  words,  when  the  "  stop  loss  order  "  goes  into  effect  it 
means  that  a  sale  will  be  made  at  the  best  price  obtainable 
at  the  time.  In  practice,  of  course,  brokers  use  their  judgment 
as  to  "  offering  it  down,"  but  a  sale  must  be  effected  at  some 
price.  "  Stop  loss  orders  "  in  inactive  stocks  are  dangerous. 
The  cautious  speculator  uses  such  a  safeguard  only  in  regard 
to  securities  that  are  frequently  traded  in,  and  almost  con- 
tinually quoted. 

The  expression  is  often  used  that  many  "  stop  loss  orders 
were  uncovered,"  meaning  that  the  decline  in  prices  was  such 
that  the  point  set  by  many  holders  of  stocks  as  their  "  stop 
loss  orders  "  had  been  reached,  and,  consequently,  such  selling 
orders  were  filled  by  the  brokers. 

In  case  of  stocks  being  sold  short  (see  "  Selling  Short  ") 
a  "  stop  loss  order  "  may  be  placed  as  a  preventative  against 
too  great  loss  in  case  of  a  sudden  advance  in  price  beyond  a 
point  at  which  the  party  desired  the  stock  bought  in  for  his 
protection. 


MONEY    AND    INVESTMENTS  383 

Stop  Order.     See  "  Stop  Loss  Orders." 

Stop  Payment.  When  a  check  is  lost  it  is  simply  necessary 
to  notify  the  bank  against  which  it  is  drawn;  giving  a  de- 
scription of  the  check,  generally  the  number  it  bears;  the 
amount  for  which  it  was  drawn;  the  date,  and  to  whom  pay- 
able; stating  that  the  check  has  been  lost  and  requesting 
that  no  payment  be  made  should  the  same  be  presented. 

Suppose  that  John  Smith  finds  a  check,  which  is  payable  to 
"  bearer,"  "  cash,"  or  "  currency;  "  that  is,  good  in  the  hands 
of  John  Smith,  or  any  one  else,  without  indorsement.  The 
person  who  lost  this  check  has  already  notified  the  bank  to 
"  stop  payment."  John  Smith  takes  it  to  some  person  whom 
he  knows  and  gets  the  cash;  that  is,  receives  the  money  upon 
it.  This  person  accepts  it  on  the  supposition  that  it  came 
honestly  into  the  hands  of  John  Smith,  and  then  presents  it 
to  the  bank  against  which  it  was  drawn  for  payment  and 
finds  that  payment  has  been  stopped.  He  cannot  collect  the 
money,  even  although  the  check  has  come  into  his  hands 
honestly,  for  the  law  expects  each  person  who  accepts  a 
check  to  satisfy  himself  as  to  whether  or  not  it  properly  be- 
longs to  the  person  presenting  the  same. 

All  that  is  said  above  in  regard  to  checks  applies  with 
equal  force  to  notes  and  all  papers  of  similar  nature. 

Straddle.  First  understand  the  two  subjects,  "  Call  "  — 
second  paragraph  —  and  "  Put."  A  "  straddle  "  gives  the 
owner  the  right  to  either  "  put  "  or  "  call  "  a  specified  amount 
of  a  certain  security  at  a  fixed  price.  A  "  straddle  "  on 
Illinois  Central  at  125  would  carry  the  right  to  "  put  "  or 
"  call  "  it  at  125  during  the  option  (or  if  in  London,  on  the 
last  day  of  the  option). 

Straddle  the  Market.  An  understanding  of  "  Selling  Short  " 
is  first  necessary.  One  has  "  straddled  the  market  "  when  he 
is  "  short  "  of  one  stock  and  "  long  "  of  another. 

Straight  City  Bond.  The  bondman's  term  for  an  issue  for 
which  the  faith  and  credit  of  an  entire  city  is  pledged,  as 
distinguished  from  "  special  assessment  bonds,"  to  which 
subject  the  reader  is  referred. 

Straight  Paper.     Same  as  "  single-name  paper." 

Straw  Board.     American  Straw  Board  Co. 

Straw  Name.  A  general  example  will  best  illustrate  this 
term:  The  laws  of  many  States  stipulate  that  savings  banks 
shall  not  loan  money  to  an  individual,  firm,  or  corporation, 
without  collateral  or  mortgage  security,  unless  the  borrower 
shall  furnish  the  indorsement  of  a  certain  number  of  persons 
upon  the  note,  the  intent  of  such  laws  being,  that  in  case  the 
original  maker  of  the  note  is  not  for  any  reason  able  to  meet 


384  MONEY    AND    INVESTMENTS 

its  payment,  the  bank  may  demand  payment  of  the  indorsers. 
Of  course,  the  spirit  of  such  laws  contemplates  each  indorser 
having  sufficient  financial  means  to  make  such  payment; 
in  other  words,  that,  for  the  amount  of  the  debt,  he  is  just  as 
good  as  the  maker.  The  spirit  is  continually  being  broken  by 
banks  being  willing  to  accept  as  indorsers  the  signatures  of 
persons  absolutely  incapable  of  paying  the  obligation.  Cases 
are  not  at  all  infrequent  of  notes  for  large  amounts  bearing 
the  indorsements  of  clerks  or  office  boys,  with  no  means 
whatsoever.  The  letter  of  the  law  is  complied  with,  but  such 
indorsers  are  known  as  "  straw  names,"  having  no  value  or 
stability. 

Street.  "  The  Street  said  so  and  so,  "  "  The  Street  was 
uneasy,"  and  such  like  expressions  arise  from  the  use  of  the 
term  "  Wall  Street  "  or  "  State  Street,"  which  designate  the 
financial  centres  respectively  of  New  York  and  Boston. 
Throughout  the  country  at  large  "  Street  "  means  the  financial 
centre  or  pulse  of  New  York. 

Street  Broker.  A  broker  between  offices:  one  who  buys 
from  one  banker  and  sells  to  another.  These  men  have  their 
uses  and  are  frequently  called  upon  by  bankers  to  hunt  up 
some  security  not  dealt  in  actively  upon  the  stock  exchange. 
The  bankers  can  better  afford  to  pay  the  small  commission 
asked  than  to  devote  the  time  to  that  end  themselves.  Again, 
a  banker  may  wish  to  get  control  of  certain  bonds  and  prefer 
to  deal  through  a  "  street  broker  "  rather  than  disclose  his 
own  identity. 

Street  Call  Loans.  Loans  made  to  or  between  brokers; 
loans  carrying  stock  exchange  and  similar  securities  as  col- 
lateral; loans  made  in  the  "  Street,"  meaning  Wall  Street, 
State  Street,  etc.,  and  representing  in  a  broader  sense  the 
financial  centres  of  New  York,  Boston,  etc. 

Street  Certificate.  The  stock-broker's  name  for  a  certificate 
of  stock,  or  other  similar  paper,  which  has  been  transferred  in 
blank.  (See  "  Transfer  in  Blank.")  A  certificate  of  this  kind 
may  be  passed  from  hand  to  hand  without  further  "  indorse- 
ment "  or  transfer  upon  the  books  of  the  company.  It  must 
have  the  requisites  set  forth  under  "  Good  Delivery." 

Street  Improvement  Bonds.  As  a  rule  bonds  of  this  class  are 
secured  by  a  special  tax  levy  upon  the  property  abutting  upon 
the  street  or  in  the  special  district  improved;  the  entire  city 
not  being  responsible  for  their  payment.  The  tendency  of 
the  Eastern  States  is  to  disallow  such  bonds  as  proper  invest- 
ments for  savings  banks,  and  it  is  good  judgment  for  the  in- 
vestor to  be  guided  likewise.  In  some  States,  the  city  is 
responsible  for  the  payment  in  case  of  failure  on  the  part  of 


MONEY    AND    INVESTMENTS  385 

the  improved  section  to  meet  the  obligation,  and,  in  that 
event,  the  bonds  are  said  to  be  the  "  direct  obligation  "  of  the 
municipality.  Under  such  conditions  the  objections  above 
raised  disappear. 

Street  Railway  Securities.  See  "  Electric  Railway  Securi- 
ties." . 

Stricken  from  (the)  List.  (First  read  "  Listed.")  Any 
security  which  has  previously  been  "  listed  "  on  a  stock  ex- 
change, but  which,  for  any  reason,  the  authorities  of  the 
exchange  decide  shall  be  no  longer  dealt  in  thereon,  is  said  to 
be  "  stricken  from  the  list." 

Strike  a  Balance.  To  "  strike  a  balance  "  is  to  balance  an 
account,  thus  determining  to  which  party  money  is  due,  if 
any,  and  the  amount. 

Stringent  Money  Market.  Those  having  money  to  loan  de- 
mand high  interest  rates;  loans  may  be  difficult  to  obtain  at 
any  price;  possibly  money  can  be  borrowed  only  by  those  of 
the  highest  credit,  or  upon  the  most  conservative  class  of 
collateral  security.  "  Stringency  in  the  money  market " 
generally  acts  as  a  deterrent  to  business;  making  it  hard  for 
the  business  world  to  obtain  loans  with  which  to  conduct 
business,  and  the  effect  is  apparent  at  once.  "  Stringency," 
though,  may  be  more  a  stock  exchange  factor  than  general, 
and  may  only  temporarily  restrict  speculation,  and  not  extend 
to  commerce  at  all.  The  New  York  financial  institutions  often 
artificially  raise  money  rates,  when  speculation  is  too  ram- 
pant, just  to  call  a  halt  and  thus  prevent  eventual  disaster. 

String  of  Cash.     See  "  Cash." 

Strong.  The  stock  market  is,  or  prices  are,  said  to  be 
"  strong  "  when  rapidly  advancing;  prices  rising. 

Struck  Twelve.  A  slang  expression,  meaning  that  the  limit 
has  been  reached  in  an  advancing  market,  or  a  prosperous 
condition  of  affairs.  We  may  say  that  it  "  struck  twelve  to- 
day in  Labrador  Common,"  meaning  that  the  general  feeling 
prevailed  that  there  were  likely  to  be  no  higher  quotations 
recorded  on  that  stock  than  to-day's. 

Stub.  The  "  stub  "  of  a  check-book  is  explained  under 
"  Check-Book." 

Other  books  with  detachable  leaves,  such  as  books  of  stock 
certificates  and  the  like,  are  arranged  in  a  similar  manner  to 
check-books,  and  have  "  stubs  "  in  printed  form.  In  general, 
"  stub  "  refers  to  that  part  which  is  retained  in  a  book  from 
which  leaves  are  detached. 

Another  meaning  for  this  word  is  illustrated  in  the  case  of 
the  Northern  Securities  Corporation.  After  the  stocks  which 
rnis  company  held  were  distributed  as  explained  under  the 


386  MONEY    AND    INVESTMENTS 

subject  "  Holding  Company,"  there  was  still  left  about  1% 
of  the  old  company,  and,  as  a  consequence,  to  every  holder  of 
100  shares  of  Northern  Securities  stock  was  delivered  one 
share  of  this  "  stub  stock,"  as  it  was  called,  the  "  stub  stock  " 
evidencing  ownership  in  the  remaining  assets. 

Sub-Company.     See  "  Subsidiary  Company." 

Subject.     See  "  Subject  to  Sale." 

Subject  to  Call.     See  "  Called  Bonds." 

Subject  to  Check.  Any  deposit  in  a  banking  institution 
which  the  depositor  has  the  right  to  withdraw  without  notice 
to  the  bank,  by  the  use  of  a  written  order  called  a  "  check," 
being  made  payable  to  himself,  or  to  whomsoever  else  he  may 
choose  to  designate  on  its  face,  is  an  account  "  subject  to 
check."  (See  "  Check.") 

Subject  to  Prior  Sale.    Same  as  "  Subject  to  Sale." 

Subject  to  Redemption.     See  "  Called  Bonds." 

Subject  to  Sale.  In  order  to  protect  himself,  the  banker 
usually  offers  securities  "  subject  to  sale."  For  example: 
Morgan  &  Co.  offer  Maria  Jones  $10,000  worth  of  Baltimore  & 
Ohio  R.  R.  Co.  bonds.  In  the  meantime,  before  they  hear 
from  Maria  Jones,  they  may  have  an  order  from  another  party, 
and,  therefore,  make  the  sale.  The  next  day  they  receive  a 
letter  from  Maria  Jones  ordering  the  bonds;  they  notify  her 
that  they  have  already  been  sold.  If  they  had  not  made  the 
offering  to  her  upon  the  condition  of  "  subject  to  sale  "  or 
"  in  case  of  previous  sale,"  they  might  be  obliged  to  deliver 
the  bonds  to  Maria  Jones;  but,  with  the  conditions  of  previous 
sale  inserted,  she  has  no  valid  claim  against  them.  It  will  be 
seen  that  this  method  is  necessary,  because  securities  offered 
by  bankers  are  liable  to  be  sold  at  any  moment,  and,  of  course, 
they  cannot  lose  opportunities  to  sell  as  they  come  along. 

In  telegraphing,  cabling,  etc.,  the  word  "  subject  "  is  often 
used,  and  has  the  same  meaning  as  "  subject  to  sale,"  or  may 
mean,  in  the  case  of  a  bid,  that  the  bid  is  made  conditional 
upon  the  bidder  not  being  able  to  buy  elsewhere  in  the  mean- 
time. 

Subscriber.  One  who  signs  a  "  subscription  blank;  "  (see 
"  Subscription  Blank  ")  or  one  who  signs  an  agreement  to 
purchase  a  security. 

Subscription  Blank.  A  printed  form,  which  often  accom- 
panies a  prospectus  or  circular,  whereby  the  intending  in- 
vestor may  execute  an  agreement  to  purchase  the  security  or 
securities  named,  but  which  blank  provides  for  certain  con- 
ditions regarding  payment  and  delivery,  with  which  the 
signer  must  comply. 


MONEY    AND    INVESTMENTS  387 

Subsidiary  Company.  A  company  belonging  to,  or  under  the 
management  of,  another  corporation.  The  various  railway 
companies  whose  stock  is  owned  and  controlled  by  the  Boston 
&  Maine  R.  R.  Company,  in  such  a  manner  that  the  corporate 
organization  of  such  companies  is  still  maintained,  are  known 
as  its  "  subsidiary  companies  "  or,  to  be  more  brief,  "  sub- 
companies." 

Subsidiary  Silver.  In  the  United  States  "  is  legal  tender 
for  amounts  not  exceeding  $10  in  any  one  payment."  At  the 
present  time,  the  subsidiary  coins  are  half  dollars,  quarter 
dollars,  and  dimes. 

Subsidy.  It  is  the  custom  of  many  Governments  to  give 
financial  assistance  to  public  enterprises  —  railroads,  steam- 
ships, and  the  like  —  especially  at  their  inception,  as  without 
such  help  the  prosposition  might  not  be  attractive  to  investors, 
and  a  matter  of  public  need  not  developed.  To  encourage 
building  railroads  into  unsettled  regions,  and  pioneering  work 
of  that  kind,  the  Government  grants  a  "  subsidy  "  —  gives 
to  —  of  so  many  thousands  of  dollars  a  mile  of  completed 
road,  for  example,  and,  with  this  assistance,  the  railroad  goes 
on  to  completion.  "  Subsidies  "  vary  greatly  in  their  character 
and  conditions.  Some  railway  companies  have  been  granted 
in  this  country  large  tracts  of  public  land  along  their  rights  of 
way,  which  afterwards  become  valuable,  as  the  country  de- 
veloped. Steamship  companies  are  often  allowed  a  very  large 
annual  sum  for  carrying  the  mails.  In  Canada  and  Mexico, 
many  direct  grants  of  money  have  been  made;  and  so  on. 

The  investor  is,  from  time  to  time,  encouraged  to  buy 
securities  of  a  company  by  the  fact  of  a  "  Government  sub- 
sidy "  having  been  allowed  it.  This  may  be  a  very  important 
factor,  and  enough  so  to  make  an  otherwise  insecure  invest- 
ment a  good  one. 

Sub-Treasury.1  Unless  otherwise  specified,  the  New  York 
sub-treasury  is  understood,  although  there  are  "  sub- 
treasuries  "  in  other  large  cities  in  the  United  States.  The 
former  is  located  on  Wall  Street,  and  through  it  the  larger 
proportion  of  the  Government's  money  transactions  with  the 
people  are  conducted.  Such  matters  as  payment  of  checks 
issued  in  settlement  of  Government  bond  interest;  pension 
disbursements,  the  redemption  of  mutilated  paper  money, 
refunding  and  redeeming  of  Government  bonds,  etc.,  are 

1  The  first  "  sub-treasury  "  resulted  from  a  change  in  the  financial 
policy  of  the  Government  after  the  fall  of  the  Second  United  States  Bank, 
and  was  established  in  1846  in  Wall  Street. 

Besides  New  York  City,  there  are  sub-treasuries  located  at  Baltimore, 
Boston,  Chicago,  Cincinnati,  New  Orleans,  Philadelphia,  St.  Louis,  and 
San  Francisco;  a  total  of  nine. 


388  MONEY    AND    INVESTMENTS 

among  its  many    duties.      The  Assistant   Treasurer    of    the 
United  States  is  in  direct  charge. 

The  "  sub-treasuries  "  receive  money  from  the  custom- 
houses, post-offices,  and  such  other  departments  of  the 
Government,  and  are  of  material  assistance  to  the  people  in 
telegraphic  transfers  of  money  from  one  section  of  the  country 
to  another.  Between  any  two  points  in  which  there  are  such 
institutions,  gold  received  at  one  and  deposited  with  that 
"  sub-treasury  "  may  be  credited  by  telegraph  to  a  person  at 
the  other  "  sub-treasury  "  point.  Currency,  likewise,  for  sud- 
den needs,  may  be  so  transferred.  The  Government  makes  a 
charge  for  such  accommodation. 

An  importation  of  gold  at  San  Francisco  from  Australia 
may  be  immediately  credited  to  parties  in  New  York  through 
the  medium  of  the  "  sub-treasuries."  By  this  method,  Lon- 
don will  often  pay  with  Australian  gold  its  own  debts  to 
New  York. 

Sub-Treasury  Credit.    See  "  Sub-Treasury  Operations." 
Sub-Treasury  Debit.    See  "  Sub-Treasury  Operations." 
Sub-Treasury  Operations.      (First   read   "  Sub-Treasury.") 
The  following  is  an  example  of  a  newspaper  treatment  of  this 
subject: 

SUB  -  TREASURY  OPERATIONS 

Paid  to         Received  Banks 

Banks  from  Banks 

March  6  $6,087,000  $7,048,000  Lost  $    961,000 

Since  Friday  15,930,000       18,781,000  Lost  2,851,000 

The  sub-treasury  was  debtor  at  the  clearing-house  on  Wednesday 
$131,129.  There  were  no  important  items.  The  banks  have  lost  to  the 
sub-treasury  since  Friday  $2,851,000,  and  for  the  same  period  the  sub- 
treasury  was  creditor  at  the  clearing-house  $653,780.  The  sub-treasury 
paid  to  banks  $700,000  on  telegraphic  order  against  the  deposit  of  new 
gold  at  the  San  Francisco  mint. 

Supposing  the  reader  to  be  familiar  with  the  "  clearing- 
house "  system,  the  above  will  be  clearly  understood. 

In  each  city  where  there  is  a  clearing-house  and  a  sub- 
treasury,  the  latter  is  by  courtesy  made  a  member  of  the 
association,  and  "  clears  "  through  it  practically  the  same  as 
any  bank. 

The  statement  that  it  was  "  debtor  "  at  the  clearing-house 
means  that  there  Was  a  certain  amount  due  from  it  to  the 
clearing-house  under  settlement,  and  may  be  referred  to  as 
a  "  sub-treasury  debit."  The  balance  is  usually  the  other 
way,  however,  and  the  clearing-house  owes  the  sub-treasury, 
in  which  event  it  is  referred  to  as  "  sub-treasury  credit." 
The  statement  that  the  banks  have  lost  to  the  sub-treasury 


MONEY    AND    INVESTMENTS  389 

$2,851,000,  means  payments  by  them  to  the  Government. 
The  reference  to  a  telegraphic  order  against  the  deposit  of  new 
gold  at  the  San  Francisco  mint,  indicates  that  there  had  been 
deposited  in  the  hands  of  the  Government  at  San  Francisco 
$700,000,  which  was  quickly  made  available  in  New  York 
City  by  a  telegraphic  order  to  the  sub-treasury  there  from  the 
San  Francisco  mint  to  pay  it  out  in  accordance  with  instruc- 
tions given  by  the  depositing  party. 

Sub-Treasury  Receipts.  Issued  by  the  various  sub-treas- 
uries of  the  United  States  in  receipt  for  money  received  from 
various  sources,  such  as  taxes,  custom  receipts,  post-office  re- 
ceipts, and  mutilated  currency.  The  reason  why  new  cur- 
rency is  not  given  in  place  of  the  old  without  the  intervention 
of  the  receipt  is  that  it  takes  time  to  count  the  money  which 
is  deposited,  and  not  infrequently  requisition  has  to  be  made 
on  the  Treasury  at  Washington  for  the  new  currency  before 
the  transaction  is  complete.  The  receipt  given  for  mutilated 
currency  is  one  "  subject  to  count,"  and  it  will  readily  be  seen 
that  it  would  be  impossible  to  count  the  old  currency  received 
and  the  new  currency  to  be  furnished  in  its  place  while  the 
customer  is  waiting. 

Receipts  were  issued,  and  now  are  issued,  in  non-negotiable 
form,  for  legal  tenders  or  gold,  if  deposited  with  a  sub-treasury, 
but  do  not  differ  in  character  from  any  other  receipts  issued 
by  such  offices.1 

Sucre.  Monetary  unit  of  Equador.  On  Oct.  1,  1905,  as 
valued  by  the  Treasury  Department,  it  was  equal  to  $.487 
United  States  money. 

Sugar.    The  American  Sugar  &  Refining  Co. 

Sundry  Assets.  (First  read  "  Assets.")  Miscellaneous 
property  which  has  not  been  placed  under  some  definite  head- 
ing; which  has  not  been  classified. 

Support.  One  "  supports  "  the  market  when  he  buys  freely 
as  offers  to  sell  are  made,  without  endeavouring  to  make  ad- 
vantageous trades  for  himself  as  to  prices;  that  is,  buys  at 
prices  offered,  so  as  to  give  the  impression  that  there  is  a  good 
demand  and  thus  prevent  a  decline  in  prices,  and,  perhaps, 
inspire  enough  confidence  among  those  desiring  to  sell  so  that 
they  will  regain  their  courage  and  not  only  stop  selling,  but 
begin  to  buy  again. 

Supporting  Orders.  Orders  given  to  buy  securities  in  order 
to  "  support  "  the  market.  (See  "  Support.") 

Surety.  A  guaranty  or  securit)^  against  loss,  or  for  the 
carrying  out  of  some  agreed  promise  or  act.  A  person  or 

1 1  am  indebted  to  Mr.  Geo.  A.  Marden,  late  Assistant  Treasurer  of  the 
United  States  at  Boston  for  the  above. 


390  MONEY    AND    INVESTMENTS 

company  who  so  guarantees  another  acts  as  "  surety,"  and 
any  paper  or  bond  given  as  evidence  of  the  fact  bears  the 
same  title.  A  surety  company  is  one,  which,  for  proper  com- 
pensation, acts  as  "  surety." 

Surety  Company.    See  last  subject. 

Surplus.  That  proportion  of  the  earnings  of  a  business 
after  paying  all  expenses  for  operating  and  making  all  pro- 
visions for  mterest  on  bonded  indebtedness,  dividends,  in- 
surance, taxes,  rentals,  etc.,  and  is  the  amount  of  profits 
which  can  be  carried  forward  into  the  next  business  period. 
When  this  amount  of  "  surplus  "  is  added  to  a  similar  previous 
accumulation,  it  is  referred  to  as  "  total  surplus." 

The  "  surplus  "  of  a  corporation  may  be  far  greater  than 
the  capital.  A  good  illustration  is  the  case  of  the  Chemical 
National  Bank  of  New  York,  which,  on  Nov.  12,  1906,  had  a 
surplus  of  $7,200,000,  and  a  capital  of  only  $300,000. 

Surplus,  New.  This  is  explained  under  second  paragraph 
of  "  Reserve  "  and  has  reference  to  the  "  surplus  reserve  " 
on  the  basis  of  no  reserve  being  held  against  the  United  States 
Government  deposits. 

Surplus,  Old.  (See  last  subject.)  This  is  the  "  surplus 
reserve,"  taking  the  Government  deposits  into  consideration. 

Surplus  Reserve.  Cash  —  i.  e.  "  lawful  money  "  —  held 
by  national  banks  in  excess  of  the  "  reserve  "  requirements. 
(See  "  Reserve.") 

Surrender  Value.  The  "  surrender  value  "  of  an  insurance 
policy  is  what  the  company  agrees  to  pay  to  the  holder  of 
the  policy  upon  surrender  of  the  same.  This  value  is  figured 
on  the  policy  reserve  and  at  a  lesser  sum  than  what  has  been 
paid  in  in  premiums. 

Suspense  Account.  An  account  under  which  items  are 
entered,  the  final  disposition  of  which  has  not  been  deter- 
mined. An  account  in  which  an  item  is  held  in  suspense  until 
the  proper  account  is  ascertained,  to  which  it  is  afterwards 
transferred. 

Imagine  a  corporation  to  be  sued  for  $10,000  damages. 
There  is  a  chance  that  but  a  small  part,  or  none  of  it,  will  be 
allowed  by  the  courts.  The  company  may  see  fit  to  transfer 
the  full  amount  to  "  suspense  account  "  pending  the  litigation. 

Suspension.  A  temporary  delay  in  meeting  payments  on 
the  part  of  a  concern  perfectly  solvent,  but  which,  owing  to  a 
financial  crisis  or  some  unusual  existing  condition,  may  not 
be  able  to  get  its  resources  in  shape  to  meet  demands  for  a 
brief  time. 

Suspension   of   Specie   Payment.     This  took  place  about 


MONEY    AND    INVESTMENTS  391 

Jan.  1,  1862,  and  continued  until  Jan.  1,  1879;  both  gold  and 
silver  practically  disappeared  from  circulation  except  on  the 
Pacific  coast,  where,  it  is  estimated,  there  was  generally  about 
twenty-five  million  specie  in  circulation.  Small  change  was  so 
scarce  that  Congress  authorized,  first,  the  use  of  postage 
stamps,  then,  a  modified  form  of  the  latter  called  "  postal 
currency,"  and,  finally,  paper  money  in  fractional  amounts  of 
a  dollar.  There  is  practically  none  of  the  last  in  use  now  as 
money,  but  $15,245,183.88  is  still  outstanding,  a  little  more 
than  half  of  which  is  officially  estimated  as  destroyed. 

Sweating.  A  method  of  diminishing  the  weight  of  coins  by 
shaking  them  in  a  confined  space,  as  a  bag;  the  dust  so  col- 
lected and  retained  being  a  dishonest  profit.  This  used  to  be 
a  wide-spread  evil  in  England  and  strenuous  efforts  were 
made  to  break  it  up. 

Sweeten.  To  give  more  "  collateral  "  or  "  margin."  When 
a  loan  is  asked  for  and  the  collateral  offered  is  not  satisfactory 
to  the  lender,  the  borrower  "  sweetens  "  it  by  improving  the 
grade  or  adding  more  to  it. 

Swings.  Ups  and  downs  of  periods  of  business  activity. 
From  the  close  of  the  Civil  War  these  "  swings,"  back  and 
forth  from  good  to  bad  times,  followed  this  course; 

Years  Period  of  Duration 

1868  —  1873  Advance  5  years 

1873  —  1877  Decline  4      " 

1877  —  1882  Advance  5      " 

1882  —  1885  Decline  3      " 

1886  —  1892  Advance  6      " 

1892  —  1896  Decline  4      " 

1896  —  1902  Advance  6      " 

1902  —  1903  Decline  1£    " 

1903  —  Advance 


Note  the  fact  that  the  periods  of  depression  are  of  shorter 
duration  than  those  of  advance. 

"  Swings  "  in  market  prices  refer  to  the  movement  of  prices 
in  one  direction  followed  by  considerable  change  in  the  other. 
Like  the  action  of  the  pendulum  of  a  clock. 

Switching.    See  "  Grain." 

Syndicate.  A  group  of  men,  bankers,  or  any  combination 
of  the  same,  who  combine  their  mutual  interests  for  the  pur- 
chase or  control  of  certain  properties  or  securities.  The  mem- 
bers of  the  syndicate  are  generally  bound  by  what  is  called  a 
"  syndicate  agreement;  "  in  other  words,  a  written  instru- 
ment to  carry  out  the  terms  of  the  agreement,  signed  by  the 
parties.  (See  also  "  Underwriting.")  Some  person,  firm, 
bank,  or  trust  company  is  usually  selected  as  a  "  syndicate 


392  MONEY    AND    INVESTMENTS 

manager,"  whose  duty  it  is  to  see  that  the  terms  of  the 
"  syndicate  agreement  "  are  fulfilled  by  all  parties  to  it. 

Before  signing  a  "  syndicate  agreement,"  it  is  desirable  to 
note  carefully  its  provisions,  it  being  especially  important 
that  it  should  not  become  operative  until  a  sufficient  amount 
of  the  issue  in  question  has  been  subscribed  to  ensure  its 
success. 

Syndicate  Agreement.    See  "  Syndicate." 

S.  &  M.  September  and  March;  interest  or  dividend  pay- 
ments semi-annually,  beginning  with  September. 


T 

T.    The  "  ticker  "  abbreviation  for  "  terminal." 

Tael.    The  "  tael  "  is  a  weight  as  used  in  the  Chinese  money 

system.    It  is  in  no  sense  a  monetary  unit.1    (See  also  the 

subject  "  Cash.") 

1  "  One  of  the  worst  of  the  evils  from  which  China  now  suffers  is  the 
lack  of  uniformity  in  her  standards  of  value.  Her  finances  are  in  an  abso- 
lutely chaotic  condition,  on  account  of  the  instability  of  her  currency  and 
the  constantly  changing  ratio  between  one  kind  of  money  and  another. 
The  coin  in  common  use  among  the  people  is  the  copper  cash,  but  the 
standard  of  value  in  all  large  mercantile  transactions,  as  well  as  in  the 
Government  service,  is  the  silver  ounce,  or  tael.  If  there  were  only  one 
tael,  and  if  that  tael  bore  some  fixed  and  definite  relation  to  the  copper 
cash,  the  state  of  things  would  be  no  worse  than  it  is  in  silver-standard 
countries  generally;  but  there  are  more  than  seventy  local  varieties  of  tael, 
each  differing  slightly  from  every  other;  and  the  values  of  these  taels, 
expressed  in  terms  of  cash,  vary  not  only  from  day  to  day  in  time,  but  from 
district  to  district  in  space.  In  one  village  the  tael  exchanges  for  a  thousand- 
cash  string  and  a  half,  while  in  another  village  eight  hundred  cash  make, 
nominally,  a  thousand-cash  string,  and  a  tael  can  be  had  for  a  string  and 
a  quarter.  But  the  tael  is  not  the  only  silver  coin  in  circulation.  The 
Chinese  make  or  import  four  or  five  different  silver  dollars,  and  each  of 
these  has  an  uncertain  value,  in  taels  or  cash,  which  also  fluctuates  widely 
in  accordance  with  varying  conditions  of  time  and  space.  There  is  no 
uniformity  even  among  the  cash.  A  ten-cash  piece  issued  by  one  provin- 
cial mint  is  not  equal  in  value  to  a  piece  of  like  denomination  issued  by 
another  mint,  and  neither  of  them  will  buy  ten-cash  pieces  separately. 
In  Ningpo,  for  example,  a  local  ten-cash  coin  exchanges  for  nine  separate 
one-cash  pieces,  while  in  Tsingkiangpu  a  ten-cash  coin  will  buy  only  seven 
separate  cash.  Then  there  are  the  paper  notes  of  private  Chinese  banks 
and  private  foreign  banks,  which  add  still  another  complication  because 
they  are  discounted  at  rates  which  vary  directly  with  the  distance  from 
the  place  of  issue.  A  Tientsin  bank  note  may  pass  at  par  in  Peking,  but  it 
will  be  taken  only  at  a  discount  of  five  per  cent,  in  Shanghai,  and  perhaps 
ten  per  cent,  in  Canton  or  Hankow.  The  same  railroad  company  will  some- 
times accept  a  bank  note  at  par  in  one  of  its  ticket  offices  and  cut  it  five 
per  cent,  in  another.  In  my  own  experience,  bills  of  the  Russo-Chinese 
Bank  were  taken  at  par  by  the  railroad  ticket  agent  at  Peking,  while  they 
were  refused  altogether  by  the  ticket  agent  of  the  same  railroad  'at  Pao- 
tingfu,  only  a  hundred  miles  away."  —  George  Kennan  in  the  Outlook  of 
April  1,  1906. 


MONEY    AND    INVESTMENTS  393 

Taller  (or  Taller  On) .  One  who  has  but  little  capital  or  self- 
confidence,  and  who  follows  some  one  else's  lead. 

Take  Up.  A  very  common  term  used  to  denote  that  the 
purchaser  of  bonds,  stocks,  or  whatever  it  may  be,  has  paid 
for  and  obtained  delivery  of  the  same;  i.  e.  "  taken  up;  " 
got  rightful  possession  of. 

Tale.  "  By  tale;  "  i.  e.  by  count.  In  transactions  regarding 
metallic  money,  "  by  tale  "  is  used  to  distinguish  from  "  by 
weight."  The  former  would  have  reference  to  the  sum  total 
of  a  given  amount  of  gold  coin,  for  instance,  without  any 
regard  to  the  abrasion;  whereas  "  by  weight  "  would  mean 
its  actual  value,  abrasion  deducted,  and  would  naturally 
give  a  less  total  sum  than  as  if  reckoned  "  by  tale." 

Talent.  "  Talent  bought  the  stock."  Those  very  close  in 
touch  with  financial  affairs;  members,  for  instance,  of  a  stock 
exchange;  bankers  and  brokers  or  "  professional  traders." 
(See  "  Traders.")  The  ordinary  investor  or  speculator  would 
not  be  included  among  the  "  talent." 

Tamarack.    Tamarack  Mining  Co.    (Copper.) 

Tangible  Assets.  Property  which  one  may  possess  himself 
of,  such  as  real  estate,  machinery,  etc.  Good-will  would  not 
be  considered  a  "  tangible  asset." 

Tape.    See  "  Ticker." 

Tape  Price.  The  price  of  a  security  as  indicated  by  the 
"  tape."  (See  "  Tape.") 

Tare.  Tare  is  the  weight  of  the  vehicle,  cask,  or  package  in 
which  a  commodity  is  shipped;  as  in  the  case  of  a  load  of 
hay,  the  difference  in  weight  between  the  total  weight,  in- 
cluding the  cart,  and  the  weight  of  the  hay  itself  is  the  tare,  and 
must  be  deducted  from  the  total  weight  to  ascertain  the  true 
weight  of  the  hay. 

Tax  Certificates.     See   "  Delinquent   Tax   Certificates." 

Taxes  on  Stock  Transfers.  Since  June  2,  1905,  the  State  of 
New  York  has  enforced  a  stamp  tax  law  on  stock  transfers, 
which,  in  part,  is  as  follows: 

"  A  tax  is  imposed  on  all  sales,  agreements  to  sell,  deliveries, 
or  transfers,  of  shares  or  certificates  of  stock  in  any  domestic 
or  foreign  association,  company  or  corporation. 

"  The  unit  upon  which  a  tax  is  imposed  is  one  share  of 
stock,  and  the  minimum  tax  is  two  cents  thereon. 

"  Every  share  of  the  face  value  of  one  hundred  dollars  or 
less  is  taxable  in  the  sum  of  two  cents.1 

1  A  recent  court  ruling  has  decided  that  the  tax  is  now  2c.  on  each 
$100  of  face  value.  By  the  first  interpretation  of  the  law,  two  shares  of 
$50  each,  to  illustrate,  would  have  been  subject  to  double  the  tax  of  one 


394  MONEY    AND    INVESTMENTS 

"  Where  the  par  value  of  one  share  exceeds  one  hundred 
dollars,  an  additional  tax  of  two  cents  is  required  for  each 
additional  one  hundred  dollars  of  par  value  or  fraction 
thereof. 

"  The  original  issue  of  stock  by  a  corporation  is  taxable. 

"  A  sale  of  stock  made  outside  New  York  State  is  subject 
to  a  tax  if  it  is  evidenced  by  entries  in  transfer  books  or  by  any 
form  of  written  instrument  within  the  State  necessary  to 
effect  sueh  transfer. 

"  A  transfer  of  stock  in  a  building  and  loan  association  is 
within  the  provisions  of  the  law.  A  surrender  of  shares  to 
such  a  corporation  for  cancellation  upon  maturity  is  not  a 
taxable  transfer.  Shares  transferred  are  taxed  upon  par 
or  face  value  in  the  sum  of  two  cents  each  without  regard 
to  whether  the  share  is  partially  paid  in  or  not. 

"  The  surrender  of  a  certificate  of  stock  to  a  corporation  for 
the  purpose  of  receiving  other  certificates  to  be  issued  to  the 
same  owner  in  smaller  amounts,  but  in  an  aggregate  equal  to 
the  amount  of  the  surrendered  certificate,  being  a  mere  ex- 
change of  certificates  without  a  transfer  of  ownership,  is  not 
taxable. 

"  A  certificate  when  divided  and  re-issued,  part  to  a  new 
stockholder  and  part  to  the  original  owner,  is  taxable  to  the 
extent  of  the  transfer  to  the  new  purchaser  and  not  taxable 
in  the  portion  retained  by  the  original  owner. 

"  The  law  does  not  make  an  exemption  from  the  tax  of 
stock  in  religious  or  charitable  associations. 

"  Stock  held  by  a  corporation  as  treasury  stock  is  not  tax- 
able until  shares  are  issued  and  transferred  to  a  stockholder. 

"  Shares  of  stock  held  by  an  executor  or  administrator  and 
transferred  by  him  to  other  parties,  whether  heirs  or  not,  are 
subject  to  a  tax." 

The  total  receipts  by  the  State  of  New  York  resulting  from 
the  imposition  of  the  above  taxes,  for  the  calendar  year  1906, 
were  $6,500,654. 

Tax  Exempt.    See  "  Non-taxable  Investments." 

Tax  Free  Investments.     See  "  Non-taxable  Investments." 

Tax  Relief  Bond.  Bonds  issued  in  anticipation  of  payment 
of  taxes;  that  is,  a  municipality  needs  money  for  some  purpose 
immediately,  the  expenses  of  which  would  ordinarily  be  taken 
care  of  by  taxation,  the  taxes,  however,  are  being  paid  slowly 
and  not  coming  in  fast  enough  to  furnish  mnds  for  the  pur- 
pose needed.  Consequently,  bonds  having  a  short  time  to 
run  are  issued,  but  more  frequently  short  time  notes  are  sold 
for  this  purpose. 

share  of  $100  face  value,  although  the  face  values  of  the  two  lots  were 
identical.    This  was  held  to  be  unconstitutional. 


MONEY    AND    INVESTMENTS  395 

Technical.  This  is  used  in  reference  to  an  artificial  condi- 
tion of  the  market,  which  has  been  brought  about  usually  by 
"  manipulating  "  or  over-speculation;  an  unnatural  level  of 
prices,  which  cannot  last. 

Tecumseh.    Tecumseh  Copper  Co. 

Telegraphic  Transfers.    See  next  subject. 

Telegraphic  Transfers  of  Money.  A  method  of  obtaining 
immediate  use  of  money  at  a  distant  point  in  the  same  country, 
and  effected  in  the  same  general  way  as  "  cable  transfers." 
The  telegraph  company  charges  a  certain  fee  according  to  the 
sum  transferred,  plus  the  charge  for  the  telegram. 

Telephone.    American  Telephone  &  Telegraph  Co. 

Telephone  Securities.  Bonds,  stocks,  and  notes  of  the 
American  Telephone  &  Telegraph  Company  and  its  licensee 
companies.  For  the  sake  of  brevity  we  will  refer  to  the  former 
as  the  parent  company  and  the  latter  as  the  operating  com- 
panies. The  impression  prevails  that  an  extensive  amount  of 
securities  is  being  issued  from  time  to  time  by  the  parent 
company,  but,  if  the  following  facts  are  taken  into  considera- 
tion, it  may  not  seem  so  excessive.  A  large  percentage  of 
the  telephone  business  is  under  the  control  of  the  parent 
company  through  ownership  of  stock  in  the  operating  com- 
panies. The  securities  of  the  former  are  issued  to  pay  its 
proportion  (51%  or  more)  of  new  stock  as  issued  by  the 
latter.  Instead  of  this  51%  being  put  upon  the  market, 
in  each  case,  as  the  stock  of  different  operating  companies, 
it  is  represented  by  an  issue  of  securities  bearing  one  name, 
as  it  were.  Of  course  the  telephone  investment  is  small  com- 
pared to  that  of  the  railroads,  but  imagine,  by  way  of  illustra- 
tion, that  one  parent  railway  company  issued  a  uniform 
bond  to  pay  for  its  subscription  to  a  controlling  interest  in  all 
the  new  stock  issues  of  a  large  part  of  the  operating  railways 
of  the  country.  The  idea  would  prevail  that  there  was  an 
enormous  over-issue.  The  bonds  of  the  American  Telephone 
&  Telegraph  Co.  are  virtually  a  stock  issue  without  voting 
power  on  account  of  having  for  security  the  stocks  of  the  oper- 
ating companies.  The  soundness  of  these  bonds  as  an  invest- 
ment rests  largely  upon  the  success  of  the  telephone  business 
of  the  country  as  a  whole,  and  the  success  or  non-success  of  one, 
or  even  a  few,  of  the  operating  companies,  stocks  of  which  are 
behind  the  parent  company's  issues,  are  not  to  affect  the 
payment  of  the  interest  or  principal  of  the  same. 

One  point  deserves  serious  treatment,  and  much  literature 
has  resulted  from  its  consideration,  viz.,  the  large  amounts  of 
money  which  seem  to  be  required,  from  time  to  time,  for  the 
development  and  the  equipment  of  the  telephone  business. 
Yet,  such  a  demand  for  money  must  be  the  result  of  the  enor- 


396  MONEY    AND    INVESTMENTS 

mous  increase  in  the  telephone  industry  itself.  The  rapid 
increase  in  the  number  of  telephones  in  use  during  the  past 
few  years  of  prosperous  times  is  something  enormous.  There 
seems  little  expectation  of  an  end  of  this  in  a  growing  country 
like  ours  so  long  as  prosperous  times  continue.  How  many 
telephones  will  be  returned,  and  how  great  will  be  the  falling  off 
of  users  in  bad  times,  is  difficult  to  predict,  but  such  times 
of  depression  will  affect,  to  a  greater  or  lesser  degree,  most 
classes  of  business,  and  it  would  seem  that  there  is  as  much 
reason  to  anticipate  unsettled  conditions  in  relation  to  indus- 
tries in  general  as  to  the  telephone.  The  latter  is  becoming 
daily  more  and  more  a  necessity  of  modern  business  and  social 
life. 

The  ability  of  the  parent  company  to  maintain  its  present 
rate  of  dividends  upon  its  capital  stock  is  a  question  beyond 
discussion  here. 

The  stocks  and  bonds  of  the  operating  companies  as  in- 
vestments depend  entirely  upon  their  locality  and  the  exist- 
ence of  competition.  They  have  proved  very  satisfactory 
so  far,  and  there  seems  to  be  no  reason  why,  as  a  class,  they 
will  not  continue  to  be.  The  investor,  in  each  case,  should 
select  with  care,  as  he  would  the  securities  of  any  other 
corporation. 

The  independent  telephone  companies  have  been  very 
largely  situated  in  the  West,  but  are  now  becoming  more 
generally  distributed  through  the  country,  and  have  been  a 
fruitful  source  of  competition  to  the  companies  above  men- 
tioned. This  competition  has  not  resulted  very  seriously 
to  the  American  Telephone  &  Telegraph  Co.  itself,  on  account 
of  its  large  earnings  as  a  whole.  It  could  afford  to  operate  a 
licensee  company,  here  and  there,  at  a  loss  in  order  to  meet 
competition.  This  has,  however,  been  somewhat  hard  on  the 
company  so  operated.  Many  franchises  granted  in  the  Middle 
West  to  independent  companies  have  been  conditioned  upon 
these  companies  not  selling  out  to  the  American  Telephone  & 
Telegraph  Co.,  or  any  of  its  licensee  companies.  Many  of  the 
independent  companies  have  been  successful  and  the  number 
of  exchanges  is  astonishing. 

These  comparative  figures  taken  from  the  United  States 
Census  Bulletin  covering  the  telephone  statistics  of  the  year 
ending  Dec.  31, 1902,  are  given  for  the  reader's  consideration. 

Bell  Independent 

Number  of  subscribers                   1,222,327  956,039 

Number  of  Public  Exchanges              3,753  6,608 

Telephones  in  use                           1,317,178  1,053,886 

Miles  of  Wire                                  3,387,924  1,462,562 

In  this  bulletin  is  also  the  following  paragraph: 

"  The  American  Telephone  and  Telegraph  Company  re- 


MONEY    AND    INVESTMENTS  397 

ported  that  in  addition  to  the  telephones  operated  by  it  and 
its  licensees  there  were  probably  included  with  the  telephones 
reported  by  independent  companies  Bell  instruments  leased 
by  84,021  subscribers  and  operated  under  sub-license  arrange- 
ments with  its  licensees." 

In  the  report  of  the  president  of  the  American  Telephone 
and  Telegraph  Company  to  the  stockholders  on  March  26, 
1907,  appears  the  following,  covering  the  year  ending  Dec.  31, 
1906: 

"  The  number  of  exchange  stations  at  the  end  of  the  year 
operated  by  the  companies  which  constitute  our  system  was 
2,727,289.  In  addition  to  this  number  there  were  297,290 
exchange  and  toll  stations  operated  by  companies  or  asso- 
ciations under  sub-license  contracts  and  making  use  of  our 
telephones.  Adding  also  telephones  employed  for  private 
line  purposes,  our  companies  have  a  total  of  3,068,833  stations. 
The  total  mileage  of  wire  for  exchange  and  toll  service  was 
7,468,905  miles,  of  which  1,688,987  miles  were  added  during 
the  year." 

For  the  past  three  years  the  company  shows  the  following 
increase  in  subscribers'  stations: 

1904  —  Increase  over  previous  year  320,126 

1905-  "  "  525,502 

1906  —        "  540,118 

Under  date  of  March  2,  1907,  James  B.  Hoge,  President  of 
the  International  Independent  Telephone  Association,  con- 
tributed the  following:  "  There  are  approximately  3,500,000 
independent  telephones  installed  in  the  United  States,  and 
over  7,500  independent  telephone  companies  operating  in 
between  14,000  and  15,000  cities  and  towns." 

Without  making  further  comment  on  these  statistics,  it 
may  be  well  to  bear  in  mind  that  it  is  a  recognized  fact  that 
the  expense  of  operating  an  exchange  increases  enormously 
with  an  increase  of  subscribers  and  many  of  the  independent 
exchanges  are  as  yet  small  ones. 

In  newer  sections  of  the  United  States,  these  companies 
have  naturally  met  with  greater  success  than  in  New  England. 
This  is  partly  due  to  the  nature  of  the  latter  people  not  to 
change  so  rapidly  to  a  new  thing;  from  one  company  to  an- 
other; partly,  also,  to  the  loyalty  of  the  people  to  the  old 
"  Bell,"  and  its  many  shareholders,  both  in  the  old  and  suc- 
cessor company.  Local  prejudice  has  also,  in  many  instances, 
aided  the  independent  companies. 

The  fact  that  telephone  companies,  as  a  rule,  are  peculiarly 
exempt  from  certain  disadvantages  common  to  many  other 
corporations  rendering  public  service,  should  be  given  a  mo- 
ment's thought.  There  is  very  little  likelihood  of  strikes  and 


398  MONEY    AND    INVESTMENTS 

labour  troubles  and  comparatively  small  liability  from  acci- 
dents and  resulting  losses  for  damages.  Telephone  service 
being  usually  paid  for  in  advance,  little  loss  of  revenue  is 
experienced  from  bad  debts. 

The  securities  of  the  "  Independents  "  are  being  quite 
extensively  handled  in  some  parts  of  the  country.  There 
must  be  many  investors  ready  to  take  them,  and,  as  a  class, 
they  may  prove  satisfactory.  Very  likely  there  is  plenty  of 
room  in  these  progressive  growing  States  for  both  the  rival 
systems.  Let  us  hope  so.  But  give  due  thought  to  the  fact 
that  the  independent  companies,  on  the  one  side,  are  a  lot 
of  disunited  corporations,  with  many  different  manage- 
ments; on  the  other  hand,  the  centralized  management  of  the 
"  licensee  companies  "  through  their  parent  company  must 
give  the  Bell  system  a  certain  advantage. 

One  word  more.  It  is,  the  writer  believes,  a  noteworthy 
fact  that,  even  in  periods  of  widespread  business  depression, 
there  has  been  a  comparatively  slight  falling  off  of  earnings 
in  the  telephone  business.  Naturally,  there  is  more  or  less 
economizing  in  this  direction,  but  it  must  be  borne  in  mind 
that  many  of  the  telephones  are  in  on  yearly  contracts,  and 
subscribers,  in  any  event,  are  likely  to  order  out  their  in- 
struments as  one  of  the  last  means  of  economy. 

Teller.  The  one  who  receives  the  money  at  a  bank,  when 
taken  for  deposit,  is  called  the  "  receiving  teller."  The  one 
who  pays  out  money,  as  demanded  by  the  depositors,  is 
called  the  "  paying  teller." 

Temporary  Receipts.  Corporations  issuing  bonds  or  other 
securities  may  wish  to  obtain  money  from  the  sale  of  the 
same  before  the  actual  securities  are  ready  for  delivery. 
"  Temporary  receipts,"  so  called,  are  frequently  issued  at 
such  times  to  the  purchasers,  to  be  exchanged  later  for  the 
securities  themselves. 

Tender.    See  "  Bid." 

Tenn.  Coal.    Tennessee  Coal,  Iron  and  Railroad  Co. 

Tennessee.  Tennessee  Copper  Co.  There  is  also  the  Ten- 
nessee Coal,  Iron  &  Railroad  Co.,  generally  known  as  "  Ten- 
nessee Coal  and  Iron." 

Ten-Twenties.  Bonds  due  in  twenty  years,  but  subject  to 
redemption  after  ten  years  from  date  of  issue,  at  the  pleasure 
of  the  issuer. 

Term  Deposit.     Same  as  "  Time  Deposit." 

Terminal  Company  Bonds.  Proper  terminals  —  that  is, 
passenger  and  freight  stations,  yard  room  and  trackage  — 
especially  in  the  larger  cities,  has  become  a  matter  of  vast 
importance  to  railway  companies.  In  many  instances  the 


MONEY    AND    INVESTMENTS  399 

very  inability  on  the  part  of  a  railway  to  secure  proper  ter- 
minal facilities  has  prevented  its  entrance  into  a  city.1  Fre- 
quently railroads  are  unable,  on  account  of  conditions  in 
previous  mortgages  outstanding  upon  their  property,  to  create 
an  additional  indebtedness  to  pay  for  terminal  properties; 
or,  again,  several  railways  wish  to  share  the  same  terminal 
facilities.  For  either  of  the  above,  or  possibly  for  other  rea- 
sons, a  "  terminal  company  "  may  be  formed,  upon  which 
distinct  issues  of  securities  are  created,  the  proper  contracts, 
being  executed  with  the  railroad  or  railroads  using  the  same, 
to  provide  for  all  charges  for  maintenance,  interest,  etc.  It 
is  quite  customary  for  the  railroad  or  railroads  to  guarantee 
a  bond  issue  by  such  a  "  terminal  company." 

Bonds  of  the  above  nature,  as  a  rule,  are  considered  very 
safe  investments,  as  is  evidenced  in  Massachusetts  by  the  fact 
that  the  bonds  covering  what  is  known  as  the  South  Terminal 
Station  have  been  made  a  legal  investment  for  savings  banks 
in  that  State. 

An  investor  contemplating  the  purchase  of  a  terminal  bond 
must  consider  several  things: 

First,  the  strategic  position  occupied  by  the  terminal  itself; 
that  is,  whether  or  not  satisfactory  terminal  facilities  for  the 
company's  using  the  same  could  be  found  elsewhere. 

Second,  the  standing  of  the  road  or  roads  using  the  terminal 
and  their  earning  capacity  above  interest  upon  their  own 
bonded  indebtedness,  whether  or  no  in  good  times  or  bad  the 
excess  of  earnings  will  be  sufficient  to  meet  the  terminal 
contract. 

Third,  the  character  of  the  contracts  drawn  between  the 
"  terminal  company  "  and  the  railway  company  or  companies, 
whether  or  not  such  contract  or  contracts  properly  safeguard 
the  interest  payments  during  the  full  life  of  the  bond  and 
provide  for  the  payment  of  the  principal  when  it  matures, 
unless  the  real  estate  value  of  the  terminal  property  is  so 
much  greater  than  the  bonded  indebtedness  that  the  payment 
of  the  principal  need  not  be  considered. 

In  brief,  terminal  bonds  upon  properties  difficult  to  dupli- 

1  The  cost  and  importance  of  terminals  in  the  larger  cities  is  well  illus- 
trated by  a  struggle  between  two  of  our  great  railroad  systems  in  competi- 
tive railroad  building  in  the  Northwest.  The  Railway  Age  declares 
that  one  company  is  reported  to  have  invested  between  $11,000,000  and 
$12,000,000  for  terminals  in  one  city,  the  railroad  extension  leading 
to  it  being  but  180  miles  long,  upon  which  the  expenditures  for 
terminals  would  be  equivalent  to  $64,000  per  mile,  or  probably  a  greater 
cost  than  the  actual  construction  of  the  mileage  itself.  Estimating  at 
$50,000.  the  total  cost  per  mile  of  the  extension,  securities  will  un- 
doubtedly have  to  be  issued  to  the  amount  of  about  $114,000  per  mile. 
Even  with  the  realization  of  the  large  traffic  which  it  is  anticipated  that 
the  extension  will  bring  about,  such  traffic  will  have  to  be  exceedingly 
heavy  to  justify  the  construction  of  such  an  expensive  piece  of  road. 


400  MONEY    AND    INVESTMENTS 

cate  and  in  important  railroad  centres  or  shipping  points 
should  be  good  investments  if  proper  care  is  taken  to  look  into 
the  securities  along  the  lines  suggested  above. 

Term  Insurance.  A  life  insurance  policy  of  this  class  is  one 
that  is  taken  out  for  a  stated  number  of  years;  the  face  of  the 
policy  to  be  paid  only  in  case  of  death  before  the  expiration  of 
the  term.  A  term  policy  has  no  value  after  its  expiration. 

Term  of  Discount.  The  length  of  time  for  which  a  note  is 
"  discounted,"  to  which  subject  refer. 

Terms  of  Sale.  Conditions,  other  than  price,  named  by  the 
seller;  or  the  price  only;  or  both. 

Thaler.  The  "  thaler  "  of  Germany  is  an  old  silver  coin  of 
the  value  of  three  marks  or  about  seventy-two  cents  in  our 
money.  Until  recently  these  coins  had  full  value  as  legal 
tender;  they  are  now  being  rapidly  recoined  into  other  pieces 
in  the  German  monetary  system. 

The  Papers.    See  "  Documents,"  meaning  the  same. 

Third  Consolidated  Mortgage.  A  very  uncommon  issue,  but 
a  reading  of  "  Second  Consolidated  Mortgage  "  will  naturally 
make  this  subject  understood. 

Third  Mortgage.  A  mortgage  placed  upon  property  which 
already  has  two  other  mortgages  existing  upon  it:  for  in- 
stance, a  certain  piece  of  real  estate,  supposed  to  be  worth 
$15,000,  has  against  it  a  first  mortgage  for  $5,000  and  a  second 
mortgage  for  $3,000.  The  owner  wishes  to  borrow  $2,000 
more,  and  finds  some  one  who  is  willing  to  accept  a  "  third 
mortgage,"  upon  the  same,  for  that  amount,  making  the 
total  mortgage  indebtedness  against  the  property  $10,000. 
Imagine  that  the  owner  of  the  property  is  unable  to  pay  the 
interest  upon  the  "  third  mortgage  "  when  due;  in  order  for 
the  holder  of  this  mortgage  to  protect  himself,  he  must  fore- 
close the  property  under  his  own  mortgage  and  pay  the 
holders  of  the  other  two  mortgages  their  due. 

In  taking  a  "  third  mortgage,"  one  should  have  reason  to 
believe  that  the  property  will,  at  any  time  during  the  life  of  his 
mortgage,  bring  at "  forced  sale  "  a  price  sufficient  to  pay  off 
all  three  mortgages,  because  the  first  and  second  mortgages 
must  be  satisfied  in  full  before  the  "  third  mortgage  "  holder 
receives  anything. 

Third  Mortgage  Bond.    A  bond  secured  by  a  mortgage  upon 
a  property  which  already  has  two  other  mortgages  existing 
upon  it  and  which  mortgages  would  have  prior  claims  upon 
the  property  and  its  earnings.    (See  "  Third  Mortgage.") 
Third  of  Exchange.    See  "  Set  of  Exchange." 
Third  Preference  Shares.     The  English  equivalent  of  the 
American  "  third  preferred  stock."     Not   very   many  such 


MONEY    AND    INVESTMENTS  401 

issues  in  existence;  the  British  National  Telephone  Co.  has 
"  third  preference  shares  "  outstanding. 

Third  Preferred  Stock.  (See  "  Preferred  Stock.")  Such  an 
issue  as  this  is  rare,  but  it  would  simply  rank  after  the  first 
and  second  preferred  stocks. 

Third  Teller.    Same  as  "  Note  Teller." 

Thirties.     See  next  subject. 

Thirty-Day  Bill.  A  bill  of  exchange  (see  "  Exchange  ") 
may  be  drawn  payable  in  thirty  days  after  date,  but  it  is  more 
customary  to  draw  them  payable  thirty  days  "  after  sight;  " 
that  is,  after  presentation.  If  in  the  latter  form,  and  drawn 
on  England,  roughly  speaking,  ten  days  may  be  reckoned  as 
the  time  elapsed  after  drawing  before  presentation,  and  as 
three  days'  grace  is  allowed  there  on  time  bills,  it  would  make 
a  total  of  approximately  forty-three  days  before  actual 
maturity. 

Bills  of  this  kind  are  called  "  Thirties." 

Threadneedle  Street.    See  "  Lombard  Street." 

Three-Cent  Silver  Pieces.  A  small  silver  coin  of  the  United 
States,  the  minting  of  which  was  discontinued  by  Act  of 
February  12,  1873.  Legal  tender  in  amounts  not  exceeding 
$10. 

Three  C's.  The  Cleveland,  Cincinnati,  Chicago  &  St.  Louis 
Railway  Co.  is  often  referred  to  in  this  manner.  "  Three  C's  " 
is  also  used  to  refer  to  the  three  large  products  of  the  earth 
—  copper,  corn,  and  cotton. 

Three-Dollar  Gold  Pieces.  The  coinage  of  these  was  dis- 
continued under  Act  of  September  26,  1890.  They  contain 
69.66  grains  of  fine  gold  and  7.74  grains  of  alloy.  The  total 
coinage  was  only  539,792  pieces. 

Three  I's.  The  Indiana,  Illinois  &  Iowa  Railroad  Co.,  now 
a  part  of  the  New  York  Central  system,  used  to  be,  and  is  now, 
frequently  referred  to  as  the  "  Three  I's." 

Three  Months'  Bills.  These  do  not  differ  in  any  way  from 
"  ninety-day  bills  "  (to  which  subject  refer)  except  wherein 
the  actual  months  covered  might  total  in  days  more  or  less 
than  ninety  days;  that  is  to  say,  a  "  three  months'  bill  "  dated 
the  first  day  of  November,  would  cover  30  days  in  that  month, 
31  days  in  December,  and  31  days  in  January,  making  a 
total  of  92  days.  With  this  understood,  everything  else 
mentioned  under  "  Ninety-Day  Bills  "  applies  here.  It  is 
very  much  more  the  custom  to  draw  "  ninety-day  bills  " 
than  "  three  months'  bills." 

Three-Name  Paper.  A  note  for  which  three  parties  are  each 
responsible  for  payment;  a  note  bearing  three  signatures,  or 


402  MONEY    AND    INVESTMENTS 

• 

a  combination  of  three  signatures  and  indorsements,  whereby 
three  parties  are  each  responsible  for  its  payment. 

Three  Pence.  A  silver  coin  of  Great  Britain,  equal  in  value 
to  about  six  cents  United  States  money. 

Three  Sixty-Fives.  Bonds  bearing  interest  at  the  rate  of 
3.65%  per  annum.  This  peculiar  rate  results  from  the  fact 
that  it  is  the  equivalent  of  one  cent  per  day  on  each  $100 
invested.  A  good  illustration  is  the  District  of  Columbia, 
which  has  borrowed  quite  largely  by  the  issuing  of  bonds 
bearing  this  rate. 

Ticker.1  A  small  printing  machine  operated  by  telegraph, 
by  which  the  outside  world  obtains  reliable  information  as  to 
the  prices  of  securities  and  commodities  dealt  in  upon  the 
principal  exchanges  of  the  world.  It  is  the  broker's  never- 
failing  source  of  information.  The  results  are  read  from  a 
narrow  strip  or  ribbon  of  paper,  which  automatically  unwinds 
as  needed,  and,  after  passing  between  type-bearing  wheels, 
run  out  into  a  basket  set  for  the  purpose.  This  ribbon  is 
called  the  "  tape." 

The  quotations  appear  on  the  "  tape  "  in  printed  form,  the 
name  of  each  security  being  abbreviated.  The  sale  of  ten 
shares  of  common  stock  of  the  Union  Pacific  Railway  Co.  at 
110  per  share,  would  be  recorded:  "  10  U.  P.  110."  Men  group 
about  the  "  ticker,"  in  the  various  offices,  and  follow  the  un- 
winding of  the  "  tape  "  with  keen  interest,  and  the  faster  the 
"  tape "  travels,  and  the  more  audible  the  sound  of  the 
ticking,  the  greater  the  attention  which  it  attracts,  as  it 
indicates  increased  market  activity  or  something  of  impor- 
tance happening. 

Tickerosis.  A  humourous  name  for  one  who  has  a  craze  for 
watching  the  quotations  as  they  come  in  on  the  "  tape/'  and 
who  may  be  found  during  stock-exchange  hours  hanging  over 
the  "  ticker." 

Ticket-Day.  Next  to  the  last  of  the  London  "  Fortnightly 
Settling-Days"  (see  that  subject).  Upon  this  day  clearing 
tickets  are  passed.  The  broker  prepares  a  ticket  upon  which 
is  given  the  buyer's  name  and  address  and  the  price  at  which 
the  transaction  is  made,  which  he  hands  to  the  selling  jobber. 
These  tickets  go  from  one  to  another  until  they  reach  the 
actual  buyers  or  sellers.  Thus  delivery  may  be  accomplished 

1  Introduced  in  1867. 

Besides  the  stock  "  ticker  "  there  are  similar  machines  which  furnish 
quotations  upon  various  commodities,  such  as  grain,  cotton,  coffee,  etc., 
as  the  transactions  take  place  in  the  large  exchanges  where  such  commod- 
ities are  handled. 

Complete  information  in  relation  to  all  the  signs  and  abbreviations 
appearing  upon  the  "  tape  "  will  be  found  in  "The  Ticker  Book  "  by  S.  S. 
Fontaine  and  R.  L.  Neville. 


MONEY    AND    INVESTMENTS  403 

without  the  intervention  of  any  intermediaries.  (This  whole 
matter  may  be  better  understood  by  reading  "  London 
Stock  Exchange  Transactions.")  "  Ticket-day "  is  also 
called  "  Name-Day." 

Tickler.  A  book  in  which  all  debts  due  to  a  banking  insti- 
tution (or  any  one)  are  entered,  together  with  dates  of  ma- 
turity, so  that  failure  to  present  for  payment  at  the  proper 
time  may  not  occur.  It  is  a  reminder. 

Tied  Up.     See  "  Locked  Up." 

Tierce.  In  speculating  in  lard  this  term  represents  340 
pounds. 

Tight  Money.  Difficult  to  borrow  money,  except  at  high 
interest  rates,  and,  sometimes,  impossible  regardless  of  rate. 

Till  Money.  An  English  term  for  money  which  a  banker 
must  keep  close  at  hand  ready  to  meet  payment  of  checks 
as  presented  over  the  counter. 

Time  Bills.  Bills  of  exchange  (see  "  Exchange  ")  payable 
at  some  fixed  date  as  distinguished  from  "  sight  "  or  "  demand 
bills."  If  the  holder  of  a  "  time  bill  "  wishes  to  realize  money 
upon  the  same,  he  takes  it  to  some  dealer  in  "  foreign  ex- 
change," who  buys  it  at  the  prevailing  rate  of  exchange,  less 
the  interest  for  the  unexpired  time,  reckoned  on  the  basis  of 
the  rate  prevailing  in  the  country  against  which  the  bill  is 
drawn. 

Time  Certificate.    See  "  Certificate  of  Deposit." 

Time  Collateral  Paper.     See  "  Collateral." 

Time  Deposit.  A  deposit  of  money  in  a  banking  institution 
to  remain  for  a  specifieoStime.  Upon  money  deposited  in  this 
way  the  institution  is  supposed  to  pay  interest,  and  a  greater 
rate  of  interest  (if  any)  than  allowed  on  deposits  "  subject  to 
check." 

For  all  practical  purposes,  savings  bank  deposits  are  "  time." 
To  withdraw  them  before  the  expiration  of  a  given  time,  a 
greater  or  less  sacrifice  of  interest  accrues  to  the  depositor. 
Most  savings  banks  reserve  the  right,  and  it  is  so  specified  in 
fheir  deposit  books,  to  require  a  certain  notice,  thirty,  sixty 
days,  or  some  such  time,  in  which  to  pay  depositors.  This 
privilege  is  very  rarely  exercised  and  only  in  case  of  financial 
troubles. 

Time  Discount.  Any  money  gain  accruing  to  the  purchaser 
of  merchandise  on  account  of  anticipating  the  payment  of  the 
bill  for  the  same. 

Time  Draft.  (First  read  "  Draft.")  A  draft  payable  on  a 
certain  named  day  or  at  expiration  of  a  stated  length  of 
time  after  it  has  been  presented  for  "  acceptance  "  (see  that 


404  MONEY    AND    INVESTMENTS 

subject);  that  is,  after  "sight."  A  draft  payable  ten  days 
after  "  sight  "  becomes  payable  ten  days  after  it  has  been 
presented  for  "  acceptance."  The  presenting  of  the  same, 
however,  often  depends  upon  the  receipt  of  goods  against 
which  the  draft  may  have  been  drawn  for  payment,  and,  in 
such  a  case  as  above,  would  not  be  presented  for  "  acceptance  " 
until  the  arrival  of  the  goods  themselves. 

Time  Loan.  A  form  of  borrowing  where  the  agreement 
between  the  borrower  and  the  lender  sets  a  definite  time  at 
which  the  loan  shall  be  paid,  and  by  which  the  right  does  not 
exist  on  the  part  of  either  for  earlier  payment  than  the  date 
specified  in  the  note. 

Time  Money.  Loans  for  a  definite  time  as  opposed  to 
"  call  "  or  "  demand  "  loans;  loans  which  neither  the  lender 
nor  borrower  has  the  right  to  demand  or  make  payment  of 
before  the  time  specified  in  the  note. 

Time  Paper.  Notes,  drafts,  etc.,  payable  at  certain  future 
dates.  See  "  Time  Loan  "  and  "  Time  Draft." 

Tip.  Information  given  in  a  secretive,  or  what  is  supposed 
to  be  a  secretive,  way,  purporting  to  aid  one  in  deciding  as  to 
what  action  to  take  regarding  the  purchase  or  sale  of  certain 
securities.  "  Tips  "  are  sometimes  honestly  given;  some- 
times given  with  the  intent  to  mislead;  and,  again,  are  honestly 
given,  but  in  spite  of  that  fact  may  not  prove  to  have  been 
based  on  correct  information.  (Read  "  Tipster.")  Advice 
sincerely  given,  however,  by  the  legitimate  banker  or  stock 
exchange  broker  must  not  be  confused  with  the  underhand 
fatherless  advices  of  the  "  tipster." 

Tipster.  One  who  advises  another  what  to  buy  or  sell,  with 
the  expectation  of  making  a  profit,  if  the  advice  is  followed, 
either  by  the  business  being  done  through  the  one  giving  the 
"  tip,"  or  by  being  given  an  interest  in  the  profits,  if  any. 

Beware  of  a  "  tipster."  An  advertisement  of  one's  being 
able  to  furnish  "  tips  "  on  stocks,  returning  fabulous  wealth 
to  those  seeking  the  advertiser's  advice,  is  a  thing  to  be 
avoided  like  the  smallpox.  No  legitimate  broker  does  any- 
thing of  this  kind.  A  member  of  the  stock  exchange  so 
advertising  would  be  heavily  penalized  by  the  officers  of  the 
exchange.  In  the  financial  world,  there  is  no  such  thing  as  an 
"  absolute  certainty  "  for  the  making  of  money.  If  it  existed, 
there  would  be  no  need  to  advertise  regarding  it. 

A  good  example  of  a  circular  sent  out  by  an  irresponsible 
member  of  society  of  this  kind,  who  advertised  that  all  trades 
were  made  on  either  the  New  York  Stock  Exchange  or  the 
Consolidated  Stock  Exchange,  is  one  which  reads  in  part: 

"  The  funds  are  operated  by  us  for  our  clients  on  informa- 
tion which  we  receive,  and  which  we  are  supposed  to  use  for 


MONEY    AND    INVESTMENTS  405 

our  own  benefit,  and  which  we  are  not  supposed  to  retail  to  the 
public  at  large.  At  the  present  time  a  certain  low-priced  rail- 
way stock  has  been  cornered.  It  will  mean  a  profit  in  from 
five  to  ten  days  of  200  or  300  per  cent.  In  other  words,  we  will 
return  every  dollar  you  send  to  us,  with  6  per  cent,  interest, 
inside  of  10  days  if  the  movement  does  not  take  place  as 
scheduled.  If  it  does,  we  will  return  all  the  money  you  send, 
with  all  the  profits,  less  5  per  cent,  of  the  profits,  our  commis- 
sion. Why  such  generosity?  Just  to  get  acquainted  with 
you  —  to  get  you  for  a  permanent  customer." 

Title  Insurance.  A  plan  by  which  one  may  obtain  insurance 
against  loss  arising  from  an  imperfect  title  to  real  estate,  it 
falling  upon  the  company  to  satisfy  itself  as  to  the  title's 
soundness.  This  is  often  advisable  for  those  purchasing 
mortgages. 

Title  Insurance  Company.    See  "  Mortgage." 

To  Account  Rendered.  Indicating  that  a  bill  or  statement 
for  the  same  had  been  previously  furnished  the  debtor. 

To  Bearer.    See  "  Payable  to  Bearer." 

To  Bill  Rendered.     See  "  To  Account  Rendered." 

To  Boot.  Money  or  anything  given  as  an  extra  inducement 
to  effect  an  exchange  (swap)  between  parties.1 

Token  Money.  Formerly  issued  by  merchants  as  small 
change  when  there  was  a  scarcity  of  Government  coins  of 
small  denominations.  They  had  the  general  appearance  of 
coins,  but  not  equal  in  value  to  the  face  amount.  The  issuers 
were  expected  to  redeem  them  on  demand. 

Government  issues  of  minor  coins,  which  in  themselves  are 
of  less  value  than  their  face,  but  which,  by  law  or  custom, 
are  current  at  their  face  value,  or  in  excess  of  their  real  value, 
are  "  token  "  coins;  such  as  our  copper  cents  and  nickel  coins. 

Tolerance.  The  legal  allowance  for  abrasion  of  coins,  below 
which  the  Treasury  will  not  redeem  them  at  their  face  value. 
The  allowance  varies  with  the  time  of  circulation.  Also  called 
"  Mint  Remedy." 

Ton  Mile.  The  movement  of  one  ton  of  freight  one  mile. 
It  is  taken  as  the  unit  of  cost  and  service  in  freight  transpor- 
tation. Transportation  service  consists  of  two  factors,  weight 
and  distance.  The  weight  alone  is  no  indication  of  the  amount 
of  a  railroad's  business;  that  is  to  say,  a  railroad  carrying  a 

1  Trenholm  states  that "  money  was  probably  at  the  very  first  used  only 
as  a  make-weight  in  bartering  and  trading ;  the  '  boot,'  as  we  call  it  now. 
It  may  be  imagined  that  when  bartering  and  '  trading  '  became  close,  some 
article  of  general  acceptability  was  added  to  the  less  valuable  of  the  two 
things  under  exchange,  so  as  to  equalize  the  values  received  by  the  parties 
to  the  barter." 


406  MONEY   AND  INVESTMENTS 

larger  number  of  tons  than  another  might  actually  be  doing 
less  business,  because  the  number  of  tons  carried  was  for  a 
less  distance. 

The  product  of  tons  and  miles  is  used  by  railroads  to  com- 
pare business  done  with  that  of  other  roads,  or  with  their  own 
business  in  other  years. 

Ton  Mile  Cost.  The  cost  of  carrying  one  ton  of  freight  one 
mile.  This  cost  cannot  be  accurately  ascertained.  It  is 
merely  a  rough  approximation  used  by  railroads  for  com- 
parative statistical  purposes. 

Tonnage.     The  amount  of  freight  carried  by  rail  or  boat. 

Tonopah.  Tonopah  Mining  Co.  of  Nevada.  (Gold  and 
silver.) 

Tontine  Insurance,  A  life  insurance  contract  which  pro- 
vides that  all  payments  made  by  the  insured  and  all  accrued 
profits  shall  be  forfeited  and  the  contract  terminated  upon  the 
non-payment  of  any  premium  when  due.  Sometimes  used 
incorrectly  to  designate  deferred  dividend  policies  which  have 
both  cash  surrender  and  paid-up  values.  These  policies  are 
semi  or  free  "  tontine,"  being  "  tontine "  only  as  to  their 
dividends,  which  are  lost  to  the  insured  in  case  of  death  or 
lapse. 

To  Order.     See  "  Payable  to  Order." 

Top-Heavy.  A  market  is,  or  prices  are,  "top-heavy" 
when  too  high  for  the  times,  and  ought,  judging  from  existing 
conditions,  to  tip  over,  react,  or  decline. 

Toppy.  Prices  getting  dangerously  high  and  ready  to 
topple  over;  top-heavy. 

Torrington.     The  Torrington  Co.  (Needles,  etc.) 

Total  Surplus.     See  "  Surplus." 

Touched.  "  General  Electric  touched  180;  "  meaning  that 
the  stock  of  that  company  reached  the  price  of  $180  per 
share. 

TR.  The  "  ticker  "  abbreviation  for  "  trust  receipts."  It 
is  also  otherwise  used  to  mean  "  transit  "  or  "  trust." 

Traction  Shares.  In  general,  the  stock  of  any  or  all  street 
railway  companies;  but,  as  used  in  the  New  York  newspapers, 
stocks  of  the  local  companies. 

Traction  Stocks  (or  Bonds).  Issues  of  securities  by  street 
railway  companies  of  all  kinds,  whether  operating  elevated 
roads,  surface  lines,  or  subways.  It  is  to  distinguish  these 
securities  from  railroad  companies,  as  commonly  understood, 
that  the  word  "  traction  "  is  used.  (See  "  Electric  Railway 
Securities.") 

Trade  Balance.     Same  as  "  Balance  of  Trade." 


MONEY    AND    INVESTMENTS  407 

Trade  Bills.  An  English  term  for  "  inland  (exchange) 
commercial  bills."  (See  "  Exchange.") 

Trader-Broker.  A  member  of  the  stock  exchange  who  buys 
and  sells  on  his  own  account. 

Trade  Discount.  The  discount  allowed  by  the  manufacturer 
or  wholesaler  to  some  one  else  in  the  trade,  generally  the 
retailer,  on  goods  purchased;  the  goods  themselves  to  be 
billed  at  the  retail  price,  and  the  discount,  therefore,  being  so 
much  off  the  retail  price.  Dealers  of  certain  commodities,  the 
prices  of  which  have  a  wide  range  of  fluctuation,  such  as 
paper,  glass,  etc.,  have  fixed  charges  for  their  goods,  and  issue 
discount  sheets,  from  time  to  time,  stating  what  discounts 
from  these  prices  will  be  allowed. 

Trade  Dollars.  Authorized  by  the  Act  of  February  12, 
1873,  containing  420  grains  troy;  intended  for  circulation  in 
oriental  countries  as  a  substitute  for  the  Mexican  dollar; 
slightly  exceeding  the  same  in  weight;  formerly  legal  tender 
in  the  United  States  in  sums  not  exceeding  $5.  This  latter 
quality  was  withdrawn  in  1876  and  the  coinage  was  limited 
to  such  amounts  as  the  Secretary  of  the  Treasury  should  con- 
sider sufficient  to  meet  the  export  demand.  In  1887  the 
retirement  of  trade  dollars  and  their  recoinage  into  standard 
silver  dollars  or  subsidiary  silver  was  provided  for  by  law. 
The  total  number  of  trade  dollars  coined  was  35,965,924. 
The  number  redeemed  under  the  Act  of  1887  was  7,689,036. 
For  six  months  after  the  passing  of  the  Act  of  1887  trade 
dollars  could  be  exchanged,  dollar  for  dollar,  for  standard 
silver  dollars  or  subsidiary  coin.  Since  the  expiration  of  that 
redemption  period  Trade  Dollars  have  been  purchased  as 
bullion  when  presented  at  the  mints. 

Trade  Paper.     See  "  Business  Paper." 

Traders.  Those  who  make  a  business  of  buying  and  selling 
securities  upon  their  own  accounts.  They  must  not  be  con- 
fused with  bankers  who  sell  to  regular  clients,  or  with  brokers 
who  execute  orders  on  a  commission  for  others. 

There  are  several  classes  of  "  traders  "  so-called;  first, 
those  who  are  not  stock  exchange  members;  second,  pro- 
fessional traders,  who  differ  from  the  first  named  only  in 
owning  stock  exchange  seats,  who  also  have  their  orders 
executed  by  some  other  stock  exchange  member,  and 
to  whom  they  pay  a  very  much  reduced  commission,  in  ac- 
cordance with  the  stock  exchange  rules,  but  do  not  go  upon 
the  floor  of  the  stock  exchange  to  execute  their  own  orders, 
although  they  would  be  privileged  so  to  do,  in  which  latter 
event  they  would  become,  third,  room  traders;  i.  e.  those 
upon  the  floor  of  the  stock  exchange,  who  buy  and  sell 


408  MONEY    AND    INVESTMENTS 

securities  for  their  own  account.  Such,  of  course,  must  be 
members  of  the  stock  exchange. 

One  writer  very  well  says: 

"  Trading  in  stocks  can  ordinarily  be  divided  into  profes- 
sional and  public  dealings.  There  is  a  great  difference  between 
the  two.  Professional  trading  includes  manipulation  and  the 
operations  of  those  who  make  trading  in  stocks  a  considerable 
part  of  their  daily  business.  Trading  by  the  public  covers 
investment  business  and  a  form  of  dealing  which  is  partly 
speculative  and  partly  investment.  The  professional  operator 
trades  all  the  time.  Public  trading  is  variable  and  very  un- 
certain." 

Trading.  Buying  and  selling  securities  for  personal  gain, 
the  dealings  being  with  bankers  or  brokers  and  not  with  the 
investment  public.  A  reading  of  the  subject  under  the  head- 
ing "  Traders  "  will  give  a  fair  idea  of  what  is  known  as 
"  trading." 

Traffic  Density.  May  be  either  "  freight  density,"  or 
"  passenger  density."  (See  those  subjects.) 

Traffic  Pools.     See  footnote  to  the  subject  "  Pool." 

Train  Mile.  The  movement  of  a  train  one  mile.  It  is  taken 
as  the  unit  of  movement  of  trains  between  terminals. 

Transfer.     See  "  Transfer  of  Stock." 

Transfer  Agent.  A  person,  banking  house,  bank,  or  trust 
company  —  generally  the  latter  —  which  has  in  its  possession 
the  books  of  unissued  stock  certificates,  and,  probably,  a 
seal  of  the  corporation,  for  which  it  acts  as  transfer  agent, 
and  which  is  authorized  to  issue  new  certificates  for  old  ones 
when  presented,  properly  assigned  and  witnessed,  and  to  keep 
a  record  of  all  such  transfers. 

A  "  transfer  agent  "  is  one  through  whom  a  change  in 
ownership  of  a  corporation  is  made;  corresponds  to  a  register 
of  deeds  in  a  transfer  of  real  estate. 

A  great  many  corporations  do  not  have  "  transfer  agents," 
in  which  case  transfers  of  stock  are  made  through  the  office  of 
each  corporation  itself,  some  officer  —  generally  the  treas- 
urer —  keeping  the  records  and  seal. 

Transfer  Book.  A  book  in  which  is  recorded  transfers  of 
shares  of  stock,  showing  a  change  of  ownership. 

Transfer  Books  Closed.     See  "  Books  Close." 

Transfer  in  Blank.  First  read  "  Transfer  of  Stock."  It 
will  there  be  observed  that  there  is  a  blank  on  the  back  of  each 
stock  certificate  which  provides  that  the  one  wishing  to  make 
a  transfer  of  it  may  fill  in  the  name  of  the  person  to  whom  the 
stock  is  sold,  or  to  be  transferred.  If,  for  instance,  Maria 
Morton  sells  her  fifty  shares  to  John  Roe,  and  fills  in  his  name 


MONEY    AND    INVESTMENTS  409 

in  this  blank,  then  he  only  is  entitled  to  have  a  new  certificate 
issued  in  his  name,  and  it  is  notice  to  the  corporation  that 
John  Roe  owns  the  certificate.  But  if  Maria  Morton  sells  and 
delivers  her  certificate  to  John  Roe,  and  no  name  is  filled  in 
as  above,  then  the  certificate  can  pass  from  owner  to  owner, 
without  the  necessity  of  a  new  one  being  issued  each  time. 
However,  should  there  be  any  dividend  declared  in  the  mean- 
time and  while  the  books  of  the  company  still  showed  Maria 
Morton  to  be  the  owner  of  the  stock,  the  dividend  would  go 
to  her  and  not  to  John  Roe,  or  any  subsequent  owner.  It 
would  be  proper  and  legal  for  the  owner  of  the  stock  at  the 
time  of  the  declaration  of  any  dividend  to  demand  of  the 
person  from  whom  he  bought  the  stock,  and  so  on  back  to 
Maria  Morton,  the  payment  of  the  amount  of  such  dividend, 
and  she  should  pay  it  to  John  Roe,  taking  a  receipt  from  him 
at  the  time  of  so  doing. 

There  is  an  exception  in  case  of  the  stock  being  sold  "  ex- 
dividend,"  for  an  explanation  of  which  turn  to  that  subject. 

In  the  case  of  the  sale  of  a  stock  of  doubtful  value,  where 
possibly  the  corporation  is  in  danger  of  failure,  it  is  very  im- 
portant that  the  seller  should  personally  attend  to  making  the 
transfer  on  the  company's  books,  for  the  name  on  the  records 
of  the  company  would  be  accepted,  in  law,  as  evidence  of 
ownership,  and  if  the  stockholders,  as  in  national  banks, 
were  liable  for  the  debts  of  the  corporation  to  an  additional 
amount  equal  to  the  par  value  of  the  stock,  then  those  whose 
names  appeared  on  the  records,  at  the  time  of  the  failure, 
as  owners  of  the  stock,  would  be  the  ones  liable.  By  far  the 
safest  way  is  for  the  seller  to  forward  the  certificate  to  the 
transfer  agent  (see  "  Transfer  Agent  "),  giving  instructions  for 
the  issuing  of  the  new  one,  thus  being  assured  of  the  change 
in  name  upon  the  records.1  Never  "  transfer  in  blank  "  any 

1  The  very  pertinent  objection  may  be  raised  here,  of  forwarding  a  stock 
to  be  transferred  into  the  name  of  another  party  before  receiving  payment 
for  the  same.  Likewise,  the  transferee  might  object  to  paying  for  the  stock 
until  delivered.  To  prevent  all  doubt  and  risk,  this  may  oe  effectually 
accomplished,  as  follows:  The  seller  agrees  to  make  delivery  by  transfer, 
as  it  is  called.  The  transferee  agrees  to  pay  for  the  stock  upon  delivery. 
The  latter  executes  a  power  of  a'ttorney,  authorizing  the  transfer  of  the 
stock  from  himself  to  the  original  party;  so  that,  at  any  time  previous  to 
the  delivery  and  payment  for  the  stock,  the  seller  could,  by  the  use  of  power 
of  attorney,  have  it  re-transferred  to  himself.  He  will  hold  this  power  of 
attorney;  forward  the  stock  to  the  transfer  office  with  instructions  for  it 
to  be  returned  to  him  after  transfer.  Upon  its  receipt,  he  will  deliver  to  the 
purchaser  the  certificate  of  stock  in  the  latter's  name,  together  with  the 
power  of  attorney  referred  to.  By  this  method,  if,  for  any  reason,  the 
purchaser  should  refuse  or  be  unable  to  accept  the  certificate  of  stock,  then 
the  seller,  by  the  use  of  the  power  of  attorney,  could  have  a  new  certificate 
issued  in  his  own  name. 

The  ordinary  method,  which  is  considered  sufficiently  free  from  risk  by 


410  MONEY    AND    INVESTMENTS 

stock  which  carries  additional  liability  for  debts  or  which  is 
subject  to  any  assessment  whatsoever.  (See  "  Non-Assess- 
able.") 

Transfer  Office.     See  "  Transfer  Agent." 

Transfer  of  Stock.  Transfer  of  ownership  in  a  corporation 
from  one  person  to  another.  The  actual  method  of  accom- 
plishing this  is  for  the  holder  of  the  certificate  (see  "  Stock 
Certificate  ")  to  fill  in  a  blank  to  be  found  upon  the  back  of 
the  same,  inserting  the  name  and  address  of  the  next  owner 
and  signing  his  or  her  name.  (If  owned  by  another  corpora- 
tion, then  that  corporation's  name  followed  by  the  signature 
of  the  officer  authorized  to  sign  for  such  purpose,  and  accom- 
panied by  a  copy  of  the  vote  or  extract  from  the  company's 
by-laws,  authorizing  the  transfer,  and  certified  by  some  officer 
other  than  the  one  signing  the  transfer.)  Then  the  signature 
should  be  witnessed  by  another  person  who  should  sign  after 
the  word  "  Witness."  Care  should  always  be  taken  to  make 
the  owner's  signature  upon  the  back  agree  exactly  in  wording 
and  spelling  with  the  name  as  filled  in  upon  the  front  of  the 
certificate.  For  example,  if  Mrs.  Maria  Morton  is  the  name 
on  the  front,  then  she  must  prefix  the  Mrs.  to  her  signature  on 
the  back.  The  certificate  may  then  be  sent  to  the  transfer 
agent  (see  "  Transfer  Agent  ")  and  a  new  one  —  the  old 
certificate  being  cancelled  —  will  be  issued  in  the  name  of  the 
new  owner,  and  delivered  in  accordance  with  instructions 
accompanying  the  old  certificate.  Suppose,  however,  Maria 
Morton  owned  a  certificate  for  fifty  shares  of  a  certain  stock, 
of  which  she  had  sold  to  John  Roe,  twenty.  She  would  then 
fill  in  upon  the  back,  in  the  blank  showing  the  next  owner,  as 
follows: 

^     John  Roe  twenty  shares       )      Give  in  each  case  the  full 
Maria  Morton  thirty  shares  J      post-office  address. 

And  then  the  transfer  agent  would  issue  new  certificates 
accordingly. 

There  is  another  part  of  the  blank  upon  the  back  of  a  stock 
certificate,  which  is  sometimes  filled  in  by  the  person  wishing 
to  make  transfer;  that  part  which  allows  the  naming  of 
an  attorney  to  make  the  transfer.  If,  for  any  reason,  Maria 
Morton  should  wish  to  send  her  certificates  to  some  one  in 
whom  she  placed  confidence,  giving  this  person  —  not  neces- 
sarily a  lawyer  —  power  to  go  to  the  transfer  agent  and 
accomplish  the  transfer,  she  must  fill  in  the  name  of  the  person 
to  whom  she  wishes  to  delegate  such  power  and  in  the  blank 

the  brokers,  is  for  the  seller  of  a  certificate  to  fill  in  upon  the  back  the  name 
of  the  party  to  whom  he  is  selling.  This  will  compel  a  transfer  of  the  cer- 
tificate before  it  can  again  be  sold. 


MONEY    AND    INVESTMENTS  411 

last  mentioned.  The  name  of  one's  broker  or  banker  is  often 
used  in  this  way.  (Read  "  Transfer  in  Blank.") 

Transfer  agents  must  be  satisfied  as  to  the  genuineness  of 
signatures  on  certificates.  It  is  well,  therefore,  when  the 
signature  is  likely  to  be  unknown  to  the  transfer  agent,  to 
have  some  bank,  banking  firm,  or  notary  public  guarantee 
the  signature. 

Certificates  should  always  be  made  out  in  one's  full  Christian 
name.  In  the  case  of  a  married  woman  "  Mrs."  should  be 
prefixed,  and  in  the  case  of  an  unmarried  woman  "  Miss."  In 
case  of  marriage,  or  re-marriage,  a  new  certificate  should  be 
issued  at  once  with  the  change  of  name.  To  have  this  done, 
fill  in  the  transfer  blank  on  the  back,  as  follows:  "  Mrs. 
Maria  Roe,  formerly  Maria  Morton."  Sign  the  transfer  blank 
the  same  as  on  the  front,  "  Maria  Morton  "  in  this  example, 
and  forward  for  transfer.  A  woman  must  never  use  her 
husband's  Christian  name  in  the  issuing  of  a  certificate;  for 
instance,  it  should  be  issued  to  Mrs.  Maria  Roe,  not  Mrs. 
John  Roe. 

If  a  certificate  is  received,  issued  with  any  error,  report 
such  error  to  the  transfer  agent  at  once. 

In  the  case  of  a  lost  certificate,  notify  the  transfer  agent 
immediately,  sending  description  of  certificate,  particularly 
its  number. 

In  transferring  to  a  corporation,  give  the  exact  legal  title, 
in  order  that  there  may  be  no  mistake  in  the  name. 

When  to  a  person  under  guardianship,  the  certificate  should 
read,  for  instance,  "  William  French,  minor,1  under  guardian- 
ship of  Henry  Allen."  When  a  transfer  of  such  a  certificate  is 
necessary,  the  guardian  must  send  with  it  a  recently  certi- 
fied copy  of  his  appointment  —  likewise  administrators  and 
executors,  who  must  also  send  certified  copy  of  the  will  —  also 
the  license  of  the  court  appointing  him  (if  the  laws  of  the 
State  under  which  he  is  appointed  require  such  a  license). 
If  a  guardianship  is  ended,  the  legal  evidence  must  be  fur- 
nished. 

Should  it  be  desired  to  issue  a  certificate  to  a  trustee,  or 
trustees,  send  full  description  of  the  trust,  giving  clear  refer- 
ence to  the  document  under  which  the  trust  was  created.  It  is 
best  to  give  the  name  of  the  beneficiary  if  possible. 

Never  make  any  additions  or  alterations  to  the  face  of  a 
certificate. 

Always  give  prompt  notice  of  change  of  address  to  the 
transfer  agents  of  all  the  different  stocks  owned.  Name  the 
corporations  in  the  notice. 

In  transferring  under  a  power  of  attorney,  send  the  original 
power  or  a  certified  (by  a  notary)  copy  of  it.  Such  powers 
1  If  insane,  write  "  incompetent  "  in  place  of  "  minor." 


412  MONEY    AND    INVESTMENTS 

should  be  of  recent  date,  or  clearly  show  in  their  wording  that 
they  are  still  in  force. 

Unless  there  is  State  law  giving  authority  for  direct  transfer, 
husband  and  wife  should  always  transfer  to  one  another 
through  the  medium  of  a  third  person.  Executors,  guardians, 
trustees,  administrators,  and  attorneys  should  never  have 
certificates  transferred  to  them  individually. 

Transfers  by  trustees,  administrators,  or  executors  should 
be  made  with  care.  It  is  well  to  find  out  just  what  the 
transfer  agent  wishes  in  such  cases. 

For  delivery  upon  the  New  York  Stock  Exchange,  a  certif- 
icate in  the  name  of  a  married  woman,  and  properly  signed 
and  witnessed  by  her,  is  acceptable  unless  the  transfer  books 
of  the  particular  company  are  closed,  when  a  joint  execution 
of  the  assignment  by  both  husband  and  wife  before  a  notary 
public  is  required. 

Ordinary  form  of  reverse  side  of  stock  certificate: 

For  value  received  I  hereby  sell,   assign,   and  transfer  unto 

/ 
John  Roe,  23  Broad  St.,  Cartersville,  N.C.,    all  my 


right,  title,  and  interest  represented  by  the  within  certificate,   and  hereby 

constitute  and  appoint .true  and 

lawful  attorney,  with  full  power  of  substitution,  for  the  purpose  of  effecting 
the  transfer  of  said  interest  on  the  transfer  books  of  the  depository  referred 
to  in  said  certificate. 

Dated  this    1st    day  of    Jan.,  1907. 

(Mrs.)  Maria  Jones. 
In  the  presence  of 

William  Green. 

Transfers.  Meaning  telegraphic  transfers  or  cable  transfers, 
as  the  case  may  be.  (See  "  Cable  Transfers  "  and  "  Tele- 
graphic Transfers  of  Money.") 

Transit  Stocks  and  Bonds.  Very  much  the  same  as  "  trac- 
tion securities  "  (see  "  Traction  Stocks  "),  but  in  common  use 
being  applied  more  to  the  large  street  railway  corporations  of 
greater  New  York,  such  as  the  Brooklyn  Rapid  Transit  Co., 
etc. 

Transmission  Company  Securities.  See  "  Power  Company 
Bonds." 

Transmission  of  Money.     See  "  Shipment  of  Money." 

Traveller's  Checks.     See  "  International  Checks." 


MONEY    AND    INVESTMENTS  413 

Traveller's  Letter  of  Credit.    See  "  Letter  of  Credit." 

Treasurer.  A  custodian  of  funds;  the  receiver  and  dis- 
tributer of  funds.  The  treasurer  of  any  incorporated  com- 
pany, municipality,  or  banking  institution  is  the  one  directly 
responsible  for  the  care  of  ita  financial  resources.  The  treas- 
urer of  a  savings  bank  corresponds  to  the  cashier  of  a  national 
bank.  It  is  customary  for  treasurers  to  either  sign  or  counter- 
sign all  evidences  of  indebtedness,  checks,  contracts,  etc. 
The  bookkeeping  department  comes  under  his  supervision. 

Treasury  Bills.  A  form  of  short  time  borrowing  by  the 
Government  of  Great  Britain.  It  was  first  introduced  in  1877. 
The  bills  are  drawn  in  sums  of  £1,000,  £5,000  and  £10,000 
each,  either  for  three  or  for  six  months,  and  are  issued  — 
sold  —  to  those  who  bid  for  them  at  the  lowest  rates.  That 
is  to  say,  they  do  not  bear  interest,  but  the  purchaser  obtains 
them  at  a  price  sufficiently  less  than  their  face  value  to  cover 
the  interest.  In  other  words,  the  bills  are  sold  "  discon- 
tinued." 

Treasury  Notes  of  Act  of  July  14,  1890.  By  an  Act  of  Con- 
gress, known  as  the  Sherman  Act,  the  Secretary  of  the  Treas- 
ury was  instructed  to  buy  at  the  market  price  during  each 
month,  or  so  much  thereof  as  was  offered,  fine  silver  to  the 
amount  of  4,500,000  ounces,  paying  for  the  same  with  treas- 
ury notes,  redeemable  on  demand  in  coin  and  legal  tender  for 
all  debts,  public  and  private,  except  where  otherwise  expressly 
stipulated  in  the  contract.  "  It  was  provided  in  the  act  that 
when  the  notes  should  be  redeemed  or  received  for  dues  they 
might  be  reissued,  but  that  no  greater  or  less  amount  of  such 
notes  should  be  outstanding  at  any  time  than  the  cost  of  the 
silver  bullion  and  the  standard  silver  dollars  coined  therefrom, 
then  held  in  the  Treasury  purchased  by  such  notes." 

The  purchasing  clause  of  this  act  was  repealed  by  Act  of 
November  1,  1893;  in  the  meantime  there  had  been  purchased 
168,674,682.53  fine  ounces  costing  $155,931,002  in  treasury 
notes. 

From  November  1,  1893,  to  July  1,  1894,  there  were  coined 
from  the  bullion,  140,939,750  standard  silver  dollars,  of  which 
$94,897,110  represented  the  cost  of  the  bullion  coined,  while 
the  remainder,  $46,042,640,  constituted  the  gain  or  "  seignor- 
age."  On  July  1,  1894,  the  total  amount  of  silver  bullion 
remaining  uncoined  was  5,607,238  fine  ounces. 

In  the  United  States  these  "  are  legal  tender  for  all  debts, 
public  and  private,  except  where  otherwise  expressly  stipu- 
lated in  the  contract."  On  February  28,  1905,  there  were 
outstanding  $10,330,000  of  these. 

Treasury  Stock.  Stock  which  a  corporation  has  the  right, 
under  certain  conditions,  to  issue,  but  which,  pending  the  ful- 


414  MONEY    AND    INVESTMENTS 

filling  of  the  conditions  or  the  desire  on  the  part  of  a  corpora- 
tion to  issue  the  same  in  compliance  with  conditions,  is  held 
in  the  treasury  of  the  company  as  "  treasury  stock;"  stock 
authorized  but  not  yet  issued. 

Trial  Balance.  Taking  a  "  trial  balance  "  of  a  ledger  is  the 
method  used  to  prove  the  mathematical  correctness  of  the 
"  posting  "  in  the  ledger. 

Trial  of  the  Pyx.  The  English  coinage  laws  provide  for  the 
setting  apart,  from  time  to  time,  of  specimen  coins  in  order  to 
ascertain  whether  or  not  the  laws  regulating  the  weight  and 
fineness  of  the  coins  are  being  complied  with.  Once  a  year  the 
coins  so  collected  are  tested  by  weight  and  assay  before  a 
jury  summoned  from  the  "  mystery  of  goldsmiths  of  the  City 
of  London  or  other  competent  persons."  As  the  coins  are 
chosen  so  as  to  represent  fairly  all  the  coinage  of  the  period 
since  the  last  test,  the  trial  amounts  to  a  public  attestation  of 
the  coin  as  to  its  standard  of  purity.1  The  box  or  chest  in 
which  the  specimen  coins  are  placed  awaiting  the  trial  is  the 
"  pyx." 

Triangular  Operation.  A  method,  to  use  an  example,  by 
which  London  pays  its  debts  to  Paris  through  the  medium  of 
New  York.  Really  being  a  shifting  of  London  to  our  shoulders 
of  the  duty  of  meeting  the  demands  of  Paris. 

Trimountain.     Trimountain  Mining  Co.  (Copper.) 

Trinity.    Trinity  Copper  Co. 

Trolley.    A  nickname  for  Brooklyn  Rapid  Transit  Co. 

Trolley  Securities.    See  "  Electric  Railway  Securities." 

True  Discount.  "  True  discount  "  differs  from  "  bank 
discount,"  the  former  being  the  sum  of  money,  which,  if  in- 
vested at  the  same  rate  at  which  the  note  or  obligation  is  dis- 
counted, would  amount  to"  the  "  bank  discount  "  rate  at  the 
time  the  obligation  matures;  in  other  words,  allowance  is 
made  for  the  investment  of  the  interest,  deducted  or  paid  in 
advance,  for  the  time  of  the  obligation.  Example:  The 
"  bank  discount  "  on  a  note  of  $10,000  for  six  months  at  5% 
is,  say,  $250.  The  "  true  discount  "  would  be  the  sum  of 
money  which  added  to  the  interest  on  itself  for  six  months  at 
5%,  would  equal  $250. 

The  rule  for  figuring  "  true  discount  "  is  to  multiply  the 
face  sum  of  the  note  by  the  discount  rate  per  annum  and 
divide  the  result  by  100  plus  the  rate.  This  result  is  for  a 
year,  by  the  aid  of  which  any  lesser  time  may  be  ascertained. 

Trunk  Lines.  As  commonly  understood,  the  lines  of  railway 
connecting  the  Atlantic  Seaboard  and  the  Central  West. 

1  See  "  The  Coinage  Act,  1870,"  33  Victoria,  Chapter  10. 


MONEY    AND    INVESTMENTS  415 

Trust.  There  are  two  meanings  commonly  attached  to  the 
use  of  this  term:  the  "  trust  "  as  popularly  known,  and  the 
"  legal  trust,"  so-called.  In  its  popular  sense,  it  means  a 
combination  of  competing  industries  or  businesses  for  the 
purpose  of  monopolistic  control,  as  was,  for  instance,  the 
Sugar  Trust,  in  its  early  days,  when  it  was  simply  the  combina- 
tion of  many  of  the  principal  refineries  for  this  purpose. 

Its  legal  sense  is  better  explained  by  an  illustration  than  by 
any  process  of  definition.  From  1881  to  1887  many  of  the 
whiskey  distillers  had  pooled  their  interests  for  the  purpose  of 
maintaining  prices  in  about  the  same  way  as  the  sugar  re- 
fineries already  referred  to,  and  this  was,  also,  a  trust  in  the 
popular  sense.  But  in  the  spring  of  1887  it  was  deemed 
advisable  to  form  a  "  legal  trust,"  and  the  stocks  of  the  in- 
dividual distilleries,  seeing  fit  to  enter  the  combination,  were 
exchanged  for  certificates  of  the  newly  formed  Distillers'  and 
Cattle  Feeders'  Trust,  commonly  known  as  the  "  Whiskey 
Trust."  This  was  managed  by  trustees,  who  placed  a  manager 
over  each  distillery,  and  those  not  found  profitable  were  im- 
mediately discontinued.  This  is  a  typical  illustration  of  a 
"  legal  trust,"  namely:  "  A  combination  of  competing  con- 
cerns effected  through  the  exchange  of  the  stocks  of  the  con- 
stituent companies  for  certificates  of  ownership  issued  by 
trustees  who  manage  the  enterprise." 1  Or,  to  put  it  dif- 
ferently: "  An  organization  managed  by  a  board  of  trustees 
to  whom  all  the  capital  stock  of  the  constituent  companies  is 
irrevocably  assigned;  in  other  words,  the  original  shareholders 
accept  the  trustees'  certificates  in  lieu  of  former  evidence  of 
ownership." 

A  generally  accepted  reason  for  the  creation  of  a  "  trust " 
is  to  control  output  and  prices  for  monopolistic  purposes. 
"  The  replacement  of  independent  enterprises  already  con- 
ducted on  a  large  scale  by  a  single  centralized  management." 

Professor  Ripley,  in  his  very  able  book  —  "  Trusts,  Pools, 
and  Corporations  "  —  treats  upon  this  subject  most  com- 
pletely, the  following  extracts  being  from  that  work: 

"  The  vast  majority  of  writers  recognize  that  the  Trusts 
generally  attempt  to  secure  a  monopoly  and  actually  possess 
monopolistic  features.  ...  It  is  clear,  furthermore,  that  the 
meaning  attached  to  the  term  is  such  a  degree  of  control  over 
the  supply  of  a  commodity  as  enables  the  person  or  persons 
possessing  it  to  control  the  price,  and  fix  charges  at  something 
more  than  the  normal  competitive  rate.  In  order  to  be  com- 
plete, the  monopoly  must  be  able  to  maintain  prices  at  the 
point  of  highest  net  returns. 

"...  If  the  tendency  towards  combination  means  any- 

1  Prof.  Wm.  Z.  Ripley,  Harvard  University. 


416  MONEY    AND    INVESTMENTS 

thing,  it  means  the  substitution  of  centralized  and  consoli- 
dated management  for  the  rivalry  of  independent  concerns; 
and  this  may  fairly  be  termed  monopoly  ..."  or  that 
Trusts  represent '  a  vast  accumulation  of  productive  resources 
which  renders  the  competition  of  small  concerns  hopeless.' 

"  Professor  Bemis  looks  upon  a  trust  as  '  virtually  a  monop- 
oly of  large  capital,'  possessing  '  vast  possibilities  of  social 
advantage;  '  but  thinks  that  we  cannot  pronounce  a  final 
iudgment '  until  we  have  first  removed  all  special  privileges.'  ' 

William  J.  Bryan  defines  a  "  trust  "  as  "  any  corporation 
which  controls  so  much  of  the  product  of  any  article  that  it 
can  fix  the  terms  and  conditions  of  sale."  1 

Refer  also  to  "  Trust  Estate,"  and  "  Real  Estate  Trust." 

Trust  Certificates.     See  "  Stock  Trust  Certificates." 

Trust  Company.  A  corporation  chartered  under  State  laws 
and  not  amenable  to  Government  control,  as  in  the  case  of 
national  banks.  Trust  companies,  however,  do  very  much  the 
same  business  as  national  banks  as  regards  receiving  business 
deposits,  that  is,  deposits  subject  to  check,  but  also  may 
receive  on  storage,  or  otherwise,  securities,  money,  jewelry, 
valuable  papers,  and  documents,  and  property  of  any  kind 
upon  such  terms  as  may  be  agreed  upon,  making  a  charge  for 
the  same;  may  collect  and  disburse  interest  or  income,  if  any, 
upon  principal  received  on  deposit,  and  collect  and  disburse 
the  principal  investments  when  they  become  due,  and,  in 
general,  act  as  "  trustee  "  for  the  handling  of  funds  for  minors, 
incompetents,  or  trusts  in  general.  Trust  companies  also  dea> 
in  securities,  and  receive  money  upon  which  interest  is  allowed, 
in  much  the  same  way  as  savings  banks. 

Trust  companies,  therefore,  may  fulfil  the  functions  of  all 
other  kinds  of  banking  institutions,  with  the  exception  of 
issuing  bank  bills,  as  in  the  case  of  national  banks.  In  the 
words  of  Secretary  Shaw,  "  they  are  permitted  by  law  to 
engage  in  well-nigh  every  kind  of  legitimate  business  ap- 
propriate to  private  citizens  or  corporations." 

These  companies  have  very  generally  adopted  the  rule  of 
allowing  interest  at  a  low  rate,  say  two  or  three  per  cent.,  on 
denosits  subject  to  check.  It  is,  perhaps,  this  fact,  as  well  as 
the  wide  scope  of  their  business,  which  has  caused  such  enor- 
mous increase  in  the  resources  of  trust  companies  in  recent 
years.  The  resources  of  the  trust  companies  of  New  York 
State  alone  reached  —  January  1,  1907  —  the  enormous  total 
of  $1,367,245,430,  as  against  the  savings  banks,  $1,464,950,- 
833.40,  for  the  same  date. 

Although  the  first  trust  company  for  the  care  of  trust  funds 
was  established  in  New  York  as  far  back  as  1822,  yet  there 

The  Outlook,  Sept.  8, 1906. 


MONEY    AND    INVESTMENTS  417 

was  no  very  broad  field  covered  by  such  institutions  until 
comparatively  recent  years,  for  no  such  company  existed  in 
Boston  prior  to  1871. 

One  reason  why  it  is  becoming  more  customary  to  appoint 
a  trust  company  as  executor,  trustee,  guardian,  or  adminis- 
trator, is  that  such  a  company  is  looked  upon  as  a  permanent 
institution,  and,  therefore,  not  subject  to  the  annoyances  or 
confusions  which  might  arise  from  death,  incapacity,  or  un- 
willingness to  serve  on  the  part  of  one  or  more  individuals. 
One  of  the  great  functions  performed  by  these  companies  is 
acting  as  trustee  for  railroad  and  other  mortgages,  as  agent 
for  registering  and  transferring  shares  of  stock,  and  fiscal 
agents,  in  general,  for  corporations  and  municipalities. 

In  1905  the  deposits  in  institutions  of  this  country,  such  as 
the  above,  were  estimated  at  nearly  $2,000,000,000. 

Trust  Company  Account.     See  "  Bank  Account." 

Trust  Company  Receipts.  When  a  corporation  is  under- 
going re-organization,  or  when,  for  any  purpose,  the  deposit 
of  outstanding  securities  is  asked  for,  a  trust  company  may 
act  as  custodian  for  the  same,  and  issue  its  receipts  which  may 
be  traded  in  upon  the  stock  exchange  or  used  in  the  form  of 
any  other  negotiable  instrument,  as,  for  all  practical  purposes, 
they  represent  the  original  securities. 

Trust  Deed.  The  written  or  printed  instrument  which  con- 
veys the  title  of  property  to  some  party  to  be  held  in  trust  for 
others;  the  instrument  which  provides  for  the  duties  of  a 
trustee  of  a  mortgage,  and  sets  forth  the  rights  of  the  borrower 
and  the  lender. 

The  law  finds  other  uses  for  "  trust  deed  "  than  the  above, 
but  in  investment  matters  the  definition  here  is  what  is  under- 
stood. 

Trustee.  Used  most  commonly  in  reference  to  an  individual, 
banking  house,  bank,  trust  company,  etc.,  acting  as  "  trustee  " 
of  a  mortgage.  When  a  corporation  desires  to  borrow  money 
by  the  issuing  of  bonds  there  must  be  some  party  to  act  in 
the  common  interest  of  both  the  lender  and  the  borrower. 
Trust  companies  are  becoming  the  most  common  class  of 
"  trustees,"  and  buyers  of  bonds,  nowadays,  prefer  to  have 
some  such  institution  act  as  "  trustee  "  of  the  mortgage 
securing  an  issue.  The  majority  of  trust  companies  investi- 
gate quite  carefully  all  legal  documents  in  relation  to  the  bonds 
to  be  issued;  that  is,  they  often  investigate  the  legality 
of  the  franchises;  ascertain  that  the  mortgage  covers  the 
property  which  it  purports  to  mortgage,  and  is  properly  drawn; 
and  that  all  other  legal  requirements  are  duly  complied  with. 
They  then  certify  the  regularity  of  the  issue  and  each  bond 
bears  the  trust  company's  certificate  in  some  form,  which 


418  MONEY    AND    INVESTMENTS 

indicates  that  the  bond  has  been  issued  under  its  authority 
acting  as  "  trustee." 

Should  a  default  in  either  interest  or  principal  occur,  or  the 
promises  of  the  corporation  borrowing  money  not  be  fulfilled, 
then,  under  certain  conditions,  it  is  the  "  trustee's  "  duty  to 
enforce  these  promises  or  take  possession  of  the  property  and 
act  for  the  benefit  of  the  bondholders,  in  accordance  with  the 
terms  of  the  trust  deed. 

One  who  has  the  legal  custody  of  money  or  property  (holds 
it  in  trust)  for  others  is  a  "  trustee." 

Trust  Estate.  An  estate  whose  legal  possession  and  benefits 
are  vested  in  one  or  more  persons,  the  actual  possession  and 
management  of  it,  however,  being  intrusted  to  another  party 
or  parties  —  sometimes  called  "  trustee,"  or  "  trustees." 

Trust  Funds.  Money  which,  under  specific  conditions,  is 
placed  in  the  hands  of  an  individual,  several  individuals, 
trust  company,  etc.,  to  be  cared  for  and  managed  accordingly. 

Trust  Receipt.  A  receipt  given  by  an  importing  house  to  a 
banking  house  on  account  of  goods  imported  but  against 
which  the  "  bill  of  exchange  "  has  not  matured  and  so  has  not 
been  paid.  This  gives  the  importing  house  the  possession, 
but  not  the  title  to  the  goods.  Some  receipts  provide  for  a 
storage  of  the  goods  in  a  warehouse,  under  a  "  warehouse 
receipt." 

Turn.  "  A  profitable  turn;  "  a  profitable  and  finished 
transaction.  A  "  turn  "  is  the  selling  of  a  security  (or  any- 
thing) after  its  purchase,  or  a  purchase  to  make  good  a  con- 
tract to  deliver.  (See  "  Short  Covering.") 

Turned  Down.  Declined  to  buy;  declined  to  avail  oneself 
of  the  privilege.  Suppose  a  banking  house  buys  an  issue  of 
bonds  subject  to  the  usual  conditions  of  investigation,  and, 
upon  making  its  investigation,  finds  facts  not  as  represented, 
and  ends  negotiations,  and  declines  to  purchase  the  issue.  In 
bankers'  parlance  they  are  said  to  have  "  turned  down  the 
issue." 

Turned  Over.  To  sell;  dispose  of.  "  Turned  over  their 
stocks  at  a  profit;  "  sold  them  at  a  profit. 

Turn  in  the  Market.    A  change  in  the  trend  of  prices. 

Twenty-Cent  Piece.  A  silver  coin  of  the  United  States 
minted  only  to  the  extent  of  $271,000.  This  piece  of  money 
was  found  to  be  unpopular,  being  near  the  quarter-dollar  in 
size  and  liable  to  be  passed  as  such.  Its  coinage  was  discon- 
tinued by  the  Act  of  May  2,  1878.  Legal  tender  to  the  extent 
of  $10  in  any  one  payment. 

Twenty-Five  Cent  Silver  Piece.  The  United  States  "  quarter- 
dollar,"  containing  86.805  grains  of  fine  silver  and  9.645  grains 


MONEY    AND    INVESTMENTS  419 

of  alloy.  Not  including  the  Columbian  "  quarter-dollars," 
these  pieces  had  been  coined,  up  to  June  30,  1904,  to  the  face 
value  of  $77,160,687.  These  are  "  legal  tender  "  in  amounts 
not  to  exceed  $10  in  any  one  payment. 

Twisting  the  Shorts.  (First  read  '"  Selling  Short.")  When 
the  "  short  "  selling  has  been  overdone,  prices  may  be  sud- 
denly advanced  by  artificial  methods,  compelling  those 
"  short  "  to  make  settlements  of  their  contracts  at  a  con- 
siderable loss. 

Two-Dollar  Man  (or  Broker).  A  great  many  stock  brokers, 
although  owning  stock  exchange  seats,  may  wish  to  em- 
ploy others  to  buy  or  sell  securities  for  them,  and,  con- 
sequently, employ  brokers  to  act  in  their  stead,  to  whom  they 
pay  a  reduced  commission  amounting,  usually,  to  $2  per 
one  hundred  shares.  There  are  exceptions  to  this  rate,  how- 
ever, for  the  commission  is  less  for  stocks  selling  below  certain 
fixed  prices.  Brokers  acting  in  such  capacity  for  others  are 
known  as  "  two-dollar  men."  Brokers  acting  one  for  the 
other  as  above  must  be  members  of  the  same  exchange. 

Two  Months'  Bills.  Read  what  is  given  under  "  Three 
Months'  Bills,"  to  apply  here  with  the  difference  in  time. 

Two-Name  Paper.  A  note  for  which  two  parties  are  each 
responsible  for  payment;  a  note  bearing  two  signatures,  or 
one  signature  and  one  indorsement  (also  called  "  indorsed 
paper"),  whereby,  in  either  case,  each  is  responsible  for  its 
payment. 

Two  Pence.    A  silver  coin  of  Great  Britain,  equal  in  value 
to  about  four  cents  United  States  money. 
Tx.    Taxes. 

U 

U.  G.  I.     The  United  Gas  Improvement  Co. 
U.   K.     The    United    Kingdom,   i.  e.    Great    Britain   and 
Ireland. 

UN.     The  "  ticker  "  abbreviation  for  "  unified." 
Unassented.    "  Unassented  "  securities  are  those  the  owners 

of  which  have  not  agreed  to  some  change  in  their  status. 
Uncovered  Money  (or  Paper).    Paper  money  behind  which 

there  is  no  stock  of  metallic  money  or  anything  to  redeem  or 

secure  it. 

Under.  This  is  a  term  used  in  Great  Britain  and  means 
1-32  of  1%  less  or  below  a  price.  To  illustrate,  "  under  |  " 
would  equal  3-32. 

Underlie.     "  Underlying  mortgage."     This  is  almost  self- 


420  MONEY    AND    INVESTMENTS 

explained  by  the  literal  dictionary  definition  of  the  word 
"  underlie."  An  "  underlying  mortgage  "  takes  precedence 
over  some  other  mortgage  covering  the  same  property.  It 
may  be  a  first  mortgage,  and  is  usually  so  considered,  but  all 
mortgages  on  a  property  which  have  precedence  over  any 
other  mortgage  "  underlie  "  the  latter. 

Underlying  Mortgage.     See  "  Underlie." 

Under  the  Rule.  The  meaning  of  this  term  may  be  best 
explained  by  using  this  rule  of  the  New  York  Stock  Exchange 
as  an  example:  "  When  the  insolvency  of  a  member  or  firm 
is  announced  to  the  Exchange,  members  having  contracts 
subject  to  the  rules  of  the  Exchange  with  the  member  or 
firm,  shall  without  unnecessary  delay  proceed  to  close  the 
same.  If  the  contracts  involve  securities  admitted  to  quota- 
tion upon  the  Exchange  the  closing  must  be  in  the  Exchange, 
either  officially  by  the  chairman,  or  by  personal  purchase  or 
sale.  If  the  contracts  involve  securities  not  dealt  in  on  the 
Exchange,  the  purchase  or  sale  of  such  securities  must  be 
promptly  made  in  the  best  available  market.  Should  a  con- 
tract not  be  closed,  as  above  provided,  the  price  of  settlement 
shall  be  fixed  by  the  price  current  at  the  time  when  such 
contract  should  have  been  closed  under  this  rule." 

Although  the  rules  of  other  exchanges  may  vary  somewhat 
from  the  above,  the  intent  is  substantially  the  same. 

Securities  bought  or  sold  as  above  are  frequently  quoted 
upon  the  "  tape  "  accompanied  by  the  letters  "  U.  R." 

Undertone.  "  The  undertone  of  the  market  was  weak," 
meaning  that  there  was  an  underlying  weakness  prevailing; 
a  tendency  towards  a  decline  in  prices. 

Underwriter.     See  "  Underwriting." 

Underwriters'  Agreement.  An  agreement  by  which  members 
of  an  "  underwriting  syndicate  "  are  bound.  (See  Under- 
writing "  and  "  Syndicate.") 

Underwriting.  A  method  of  guaranteeing  the  sale  of  an 
issue  of  securities.  Let  us  take  this  to  illustrate: 

A  banking  house  proposes  to  offer  at  public  sale  bonds 
amounting  in  par  value  to  $100,000,000.  An  "  underwriting 
syndicate "  is  formed  composed  of  certain  individuals  or 
corporations  —  with  some  one  among  them  selected  as  the 
"  syndicate  manager  "  —  who  agree  that  when  the  public  offer- 
ing of  these  bonds  is  made,  that  portion  which  is  not  sold,  they 
-  the  "  underwriters  "  —  will  buy  at  95c.  on  the  dollar; 
that  is,  the  "  underwriting  syndicate  "  guarantees  the  sale 
of  the  bonds  at  par.  On  all  bonds  which  are  sold,  therefore, 
they  make  5%,  and,  if  the  entire  $100,000,000  are  disposed  of, 
the  "  underwriting  syndicate  "  will  make  a  profit  of  $5,000,- 


MONEY  AND  INVESTMENTS  421 

000.  In  case  part  or  none  of  the  bonds  are  sold,  then  the 
"underwriting  syndicate"  must  take  such  portion  as  is  not 
sold,  at  the  rate  of  95.  Of  course  an  "  underwriter  "  joins 
such  a  syndicate  with  the  expectation  that  all  the  bonds 
will  be  sold,  and  that  he  will  not  be  called  upon  to  take  any 
himself.  The  banker  forming  the  syndicate  protects  himself 
by  providing  for  the  sale  of  the  issue  whether  the  public 
takes  it  or  not;  that  is,  he  insures  himself  against  a  sudden 
unfavourable  change  in  the  market,  and,  for  such  insurance, 
is  willing  to  give  a  proportion  of  his  own  profit,  which  is  the 
"underwriter's"  share. 

These  syndicates  are  sometimes  formed  so  that  each  mem- 
ber takes  and  pays  for  his  proportion  of  the  securities  in  ad- 
vance of  the  public  sale,  so  that  as  the  securities  are  sold  he 
delivers  his  proportion,  and,  if  all  are  sold,  he  profits  accord- 
ingly; if  not,  he  is  left  with  his  share  to  do  with  as  he  sees 
fit,  but  under  conditions  generally  regulated  in  the  "  under- 
writers' agreement"  (see  that  subject;  also  "Syndicate"). 

Underwriting  Syndicate.    See  "  Underwriting." 

Undesignated  City.  Cities  in  which  "  country  banks  "  (to 
which  refer)  are  located.  Cities  not  designated  as  "  central 
reserve  "  or  "  reserve  "  cities. 

Undigested  Securities.  Securities  that  have  been  issued 
and  sold  to  bankers,  underwriters  (see  "  Underwriters  "), 
etc.,  who  had  expected  to  again  sell  them  to  investors,  or  the 
"  public,"  so-called.  The  public,  owing  to  unfavourable 
market  conditions  unforeseen,  or  for  other  reasons,  not 
having  taken  these  securities,  has  not  absorbed  or  "  di- 
gested "  them,  and  they  remain  in  the  hands  of  the  bankers 
and  underwriters  "  undigested,"  where  they  are  likely  to  re- 
main until  market  conditions  improve  sufficiently  to  permit 
of  their  absorption. 

Undivided  Profits.  Earnings  or  profits  which  have  not  been 
divided  among  the  partners  in  a  firm  or  the  stockholders  in  a 
corporation.  The  difference  between  "  surplus  "  and  "  un- 
divided profits  "  is  merely  a  bookkeeping  one;  the  latter 
account  on  the  books  of  any  business,  if  it  does  not  seem 
probable  that  these  profits  will  in  the  near  future  be  divided, 
may  all,  or  in  part,  be  transferred  to  a  "  surplus  account." 
(See  "  Dividend.") 

Uneven  Market.  Many  variations  in  prices;  first  up  and 
then  down;  such  variations  at  times  may  be  large. 

Unfunded.     Indebtedness  not  funded;    "  floating  debt." 

Unification.  At  the  time  when  the  president  of  the  New 
York  Central  &  Hudson  River  R.  R.  Co.  took  the  presidency 
of  the  "  Big  Four  R.  R.,"  so-called,  and  the  Michigan  Central 


422  MONEY    AND    INVESTMENTS 

R.  R.,  both  of  which  companies  had  previously  been  in  control 
of  the  New  York  Central,  the  newspapers  reported  that  the 
latter  had  "  unified "  its  interests,  meaning  that  by  the 
presidency  of  the  different  roads  being  in  the  hands  of  one 
man  there  would  be  a  more  uniform  system  of  management. 

Of  course,  the  meaning  is  to  simplify,  make  alike.  Some- 
times a  mortgage  on  a  corporate  property  is  called  a  "  unified 
mortgage,"  meaning  that  where  there  had  been  several  mort- 
gages outstanding  before,  and  of  different  kinds,  that  these 
various  mortgages  had  been,  or  would  be  paid  off,  and  one 
common  mortgage  issued  to  take  their  places,  called  a  "  uni- 
fied mortgage."  "  Consolidated  Mortgage "  has  the  same 
meaning. 

Unified  (or  Unified  Mortgage).    See  "  Unification." 

Union  Land.    Union  Copper,  Land  &  Mining  Co. 

United  Metal  Selling  Co.  The  selling  agency  for  the  Apial- 
gamated  Copper  Co. 

United  States  Bonds.    See  "  Government  Bonds." 

United  States  Depository.  The  Secretary  of  the  Treasury 
is  authorized  to  appoint  any  national  bank  as  a  "  deposi- 
tory "  for  the  moneys  of  the  United  States  Government. 
This  is  a  method  which  the  Government  adopts  in  order  that 
a  proportion,  at  least,  of  the  large  sums  of  money  which  it 
often  accumulates  may  get  into  use.  It  is  conceivable  that 
the  Government  receipts  might  be  so  large  that  an  enormous 
amount  of  money  could  go  into  its  hands  and  thus  out  of 
circulation,  making  such  a  contraction  that  there  would  be 
a  scarcity  of  money  for  actual  use,  and  it  is  to  prevent  such 
contingencies  to  even  a  small  degree  that  this  plan  has  been 
adopted. 

The  Government  does  employ  national  banks  as  de- 
positories for  other  reasons  than  the  above.  It  has  what  are 
called  "  permanent  depositories,"  in  localities  where  the 
principal  offices  of  internal  revenue  collectors  are  located, 
or  where  sales  of  public  lands  occur,  for  the  purpose  of  re- 
ceiving the  proceeds  of  such  collections  or  sales;  also  "  special 
depositories  "  in  which  post-office  money-order  and  United 
States  Court  funds  are  kept. 

Any  bank  accepting  the  appointment,  as  above,  must  give 
satisfactory  security  by  the  deposit  with  the  Treasury  De- 
partment of  United  States  Government  bonds  and  other- 
wise. 

The  Secretary  of  the  Treasury  has,  however,  construed  the 
law  as  permitting  him,  at  his  discretion,  to  accept  other  than 
Government  bonds,  which  may,  in  his  judgment,  furnish 
sufficient  security.  There  is  an  impression  among  many  lead- 


MONEY    AND    INVESTMENTS  423 

ing  financiers  that  this  is  a  bad  precedent,  and  might,  some- 
time, lead  to  an  abuse  of  the  privilege.1 

United  States  Deposits.    See  "  United  States  Depository." 

United  States  Government  Bonds.  See  "  Government 
Bonds." 

United  States  Notes.  During  the  Civil  War,  the  United 
States  forced  a  certain  amount  of  paper  currency  into  cir- 
culation, known  as  "  greenbacks  "  or  "  United  States  notes." 
There  are  outstanding  to-day  (Feb.  28,  1905)  $346,681,016. 
They  are  legal  tender  for  all  debts,  public  and  private,  except 
duties  on  imports  and  interest  on  the  public  debt,  but  this 
latter  restriction  amounts  to  little  at  the  present  time,  be- 
cause, upon  presentation  of  any  of  these  notes,  the  United 
States  Treasury  redeems  them  in  gold  coin,  which  coin  itself 
may  be  used  as  legal  tender  for  purposes  prohibited  to  "  green- 
backs." 

United  States  Public  Debt.  One  is  apt  to  think  that  the 
debt  of  the  Government  is  its  outstanding  bonds,  but  this 
is  incorrect,  for  paper  money  of  all  kinds,  even  although  not 
interest  bearing,  is  figured  into  the  debt  statement.  Deduc- 
tions, however,  are  made  for  cash  in  the  Treasury. 

On  March  31,  1907,  the  debt,  less  cash  in  the  Treasury, 
amounted  to  $793,330,626.93.  It  was  made  up  as  follows: 
Interest  bearing  debt,  $908,233,660;  outstanding  bonds  not 
presented  for  payment,  $1,095,365.26;  debt  bearing  no  inter- 
est, $402,645,542.78,  a  total  of  $1,311,974,568.04.  In  addi- 
tion to  this,  however,  there  were  $1,130,146,869  treasury 
notes  and  certificates  outstanding,  but  these  were  offset  by  an 
equal  amount  of  cash  on  hand  held  for  their  redemption. 

United  States  Smelting.  United  States  Smelting,  Refining 
and  Mining  Co.,  formerly  the  United  States  Mining  Co. 

United  Verde.    United  Verde  Copper  Co. 

Unit  of  Account.  The  "  unit  of  value,"  as  our  gold  dollar, 
may  not  necessarily  be  coined,  but  the  "  unit  of  account  "  is 
the  selected  unit  which  itself,  and  multiples  of  which,  are 
actually  coined.  This  was  the  case  with  our  gold  dollar  before 
we  ceased  to  coin  gold  in  that  denomination,  for,  on  April 
2,  1792,  Congress  established  it  as  the  "  unit  of  the  money 
of  account  "  for  this  country. 

Unit  of  Value.    The  gold  dollar  is  the  "  unit  of  value  "  in 

'The  Secretary  obtained  his  authority  from  §5153  of  the  Revised 
Statutes  of  the  United  States,  reading  in  part  as  follows:  "  The  Secretary 
of  the  Treasury  shall  require  the  associations  thus  designated  to  give 
satisfactory  security,  by  the  deposit  of  United  States  bonds  and  otherwise, 
for  the  safe-keeping  and  prompt  payment  of  the  public  money  deposited 
with  them,  and  for  the  faithful  performance  of  their  duties  as  financial 
agents  of  the  Government." 


424  MONEY    AND    INVESTMENTS 

this  country,  and  must  be  of  a  certain  "  weight  and  fineness  " 
(25.8  grains  of  gold,  .900  fine)  and  by  it  all  values  are  meas- 
ured. This  is  to  our  money  system  what  the  pound  is  to  our 
system  of  weights.  In  like  manner  the  "  pound  sterling," 
the  "  lira,"  the  "  yen,"  etc.,  are  the  units  of  value  —  or  mone- 
tary units  —  of  Great  Britain,  Italy,  and  Japan  respectively. 
(See  "Standard.")  Trenholm,  in  "The  People's  Money," 
defines  a  "  unit  of  value  "  or  "  monetary  unit  "  as  "  a  definite 
weight  of  a  particular  metal  of  a  certain  fineness,  established 
by  law,  to  be  the  actual  substantive  value  designated  by  the 
term  which  is  the  denominational  unit  of  the  money  system 
of  the  country." 

Unlisted  Department.  "  Unlisted  Securities,"  as  distin- 
guished from  "  listed."  (See  those  subjects.) 

Unlisted  Securities.  Securities,  trading  in  which  is  per- 
mitted upon  a  stock  exchange,  the  same  as  the  "  listed  " 
ones,  but  regarding  which  it  is  understood  that  satisfactory 
information  has  not  been  furnished  the  governors  of  the  ex- 
change sufficient  to  warrant  their  official  sanction  to  the 
placing  of  the  same  upon  the  regular  "  list."  In  the  case  of 
the  New  York  Stock  Exchange,  there  is  a  "  committee  on 
unlisted  securities  "  which  has  general  charge  of  the  "  un- 
listed department  "  of  the  exchange. 

At  the  time  of  writing  (1906)  such  important  stocks  are 
among  the  "  unlisted  securities,"  as:  Amalgamated  Copper, 
American  Sugar  Refining,  American  Woolen,  etc. 

Unload.  To  sell,  dispose  of,  get  rid  of.  A  finer  meaning,  as 
used  financially,  is  to  dispose  of  certain  securities  in  season 
to  prevent  disaster;  i.  e.  to  sell  an  undesirable  stock  before 
it  declines,  in  which  event,  it  is  sometimes  said  that  the  person 
who  "  unloaded  "  succeeded  in  "  getting  ashore."  This  is  a 
bit  of  slang  which  means  the  same  as  "  unloading  "  and  is 
likened  to  a  person  getting  ashore  from  a  sinking  boat  in 
season  to  prevent  drowning. 

Unsecured  Creditor.  One  who  has  no  legal  claim  upon 
certain  specified  property  for  the  satisfaction  of  his  debt;  one 
who  must  accept  the  same  basis  of  settlement  as  all  others, 
having  no  security,  in  the  adjustment  of  the  debts  of  an 
insolvent  or  bankrupt. 

Unsteady  Market.  Many  variations  in  prices,  such  varia- 
tions at  times  being  large. 

Upset  Price.  A  fixed  price  less  than  which  a  security, 
property,  or  whatever  it  may  be,  will  not  be  sold.  For  ex- 
ample: During  the  Cleveland  administration,  at  the  time 
when  there  was  an  issue  of  Government  bonds  offered  for 
sale,  a  price  was  set  less  than  which  no  bid  would  be  received; 


MONEY    AND    INVESTMENTS  425 

it  was  permissible  to  bid  as  much  above  the  fixed  price  as 
the  bidder  saw  fit,  but  it  would  avail  him  nothing  to  bid  at  a 
less  price  than  the  "  upset  price,"  so-called. 

UR.    The  "  ticker  "  abbreviation  for  "  under  the  rule." 

Usance.  This  is  really  "  grace,"  as  applied  to  "  bills  of 
exchange;  "  the  time  allowed  in  which  bills  of  exchange  may 
be  paid.  This  varies,  by  custom,  in  different  parts  of  the 
world. 

Use  and  Occupancy  Insurance.  This  insurance  guarantees 
to  the  assured  the  use  of  the  manufacturing  buildings  and 
machinery  of  the  insured  plant  in  so  far  as  such  use  may  be 
interfered  with  by  damage  by  fire  or  sprinkler  leakage  for 
which  the  insurance  companies  are  liable  under  the  fire 
policy.  This  is  a  "  valued  policy  "  (see  that  subject)  and 
agrees  to  pay  to  the  assured  a  stipulated  amount  of  money 
for  the  entire  or  partial  interruption  in  the  use  of  the  buildings 
or  machinery,  or  both,  as  measured  by  the  product.  This  in- 
surance extends  over  one  year  of  300  working  days,  to  be 
applied  pro  rata,  both  as  to  duration  and  proportion  of 
interruption. 

Usury.  See  "  Legal  Rate  of  Interest,"  and  also  second 
paragraph  under  "  Demand  Loan." 

Utah.  Utah  Consolidated  Mining  Co.  (Gold,  silver,  and 
copper.) 


Valuation.    See  "  Assessed  Valuation." 

Valued  Policy.  A  form  of  fire  insurance  policy  under  which 
the  insured  can  recover  the  full  face  of  his  policy  in  case 
of  total  loss,  regardless  of  the  value  of  the  property  insured. 
This  makes  it  incumbent  upon  the  company  not  to  insure  to 
a  greater  value  than  the  property  covered,  for  whatever  the 
amount  of  insurance  is  accepted  under  the  "  valued  policy  " 
cannot  be  afterwards  disputed  on  the  basis  of  the  property 
having  been  over-insured.  In  New  Hampshire,  this  form  of 
policy  is  obligatory;  in  other  States  it  is  illegal,  the  reason  for 
which  is  to  guard  against  any  collusion  between  the  agent  and 
the  insured,  it  being  desired  to  prevent  the  insured  obtaining 
a  greater  insurance  than  the  value  of  his  property,  thus 
encouraging  incendiarism.  (See  "  Use  and  Occupancy  In- 
surance.") 

Value  Received.  The  giving  an  equivalent  in  value  to  the 
obligation.  Formerly  there  was  considerable  controversy 
whether  or  not,  in  a  bill  of  exchange  or  promissory  note,  it 
was  essential  to  its  validity  that  "  value  received  "  should 
be  expressed,  and  there  were  old  cases  which  decided  in  the 


426  MONEY    AND    INVESTMENTS 

affirmative.  In  most  States  this  is  not  the  law  at  the  present 
time,  it  being  well  settled  to-day  that  the  words  are  not 
necessary,  for  "  value  "  is  implied  in  every  bill,  note,  accept- 
ance, and  indorsement.  There  is  an  exception  in  the  case  of 
Missouri,  however,  where  the  words  "  value  received  "  are 
essential  to  the  negotiability  of  a  promissory  note.  In 
Pennsylvania,  it  has  long  been  customary  to  use  the  words 
"  without  defalcation  "  in  the  place  of  "  value  received," 
but  the  words  are  non-essential. 

The  statutes  of  the  State  of  Michigan  declare  that:  "  Every 
negotiable  instrument  is  deemed  prima  facie  to  have  been 
issued  for  valuable  consideration;  and  every  person  whose 
signature  appears  thereon  to  have  become  a  party  thereto 
for  value."  x 

Vanderbilt  Interests.  Those  railway  companies  in  which  the 
well-known  Vanderbilt  family  in  New  York,  and  other  persons 
associated  with  them,  own  either  direct  control,  or  control 
through  other  companies;  and  those  railway  companies  in 
which  their  direct  or  indirect  ownership  is  great  enough  to 
influence  its  management,  and  lines  leased  to  any  of  the  fore- 
going. Such  railway  companies,  for  instance,  as  the  New 
York  Central  &  Hudson  River,  Michigan  Central,  the  Cleve- 
land, Cincinnati,  Chicago  &  St.  Louis,  the  Lake  Shore  & 
Michigan  Southern,  the  Canada  Southern,  the  Lake  Erie 
&  Western,  the  New  York,  Chicago  &  St.  Louis,  the  Boston  & 
Albany,  the  Rutland,  the  Cincinnati  Northern,  the  Peoria  & 
Eastern,  the  Pittsburg  &  Lake  Erie,  etc.,  a  list  too  long  to  give 
here. 

Velvet.  Profit;  a  "  bonus."  If  a  man  buys  100  shares  of 
stock  for  $10,000,  and  later  sells  75  shares  at  such  an  advance 
in  price  that  his  original  $10,000,  plus  commission,  etc.,  is 
returned  to  him;  the  25  shares  left  standing  him  nothing,  these 
shares  may  be  called  "  velvet." 

Vendor's  Shares  (of  Stock).  Shares  issued  to  one  who  sells 
property  to  a  company,  and  in  entire  or  part  payment  for  the 
same.  An  English  term  and  custom. ' 

Victoria.    Victoria  Copper  Mining  Co. 

Virginia  Debt  Certificates.  See  "  Brown  Brothers'  Virginia 
Deferred  Certificates." 

Visible  Supply.  This  term  is  generally  used  in  reference  to 
grain,  cotton,  or  agricultural  products,  meaning  the  amount 
on  storage  in  the  large  centres  and  what  is  in  transit. 

Voluntary  Association.  An  example  of  the  use  of  such  an 
association  as  the  above  is  that  of  the  Massachusetts  Electric 
Companies,  a  "  voluntary  association  "  managed  by  a  board  of 

1  Act  265,  P.  A.  1905. 


MONEY    AND    INVESTMENTS  427 

trustees,  who  hold  the  title  to  its  assets,  consisting  of  the 
majority  and,  in  most  cases,  practically  all  of  the  stock  of 
certain  street  railway  and  lighting  companies.  These  com- 
panies were  already  in  existence  and  their  capitalization 
fixed,  so  far  as  the  property  owned  was  concerned,  when  this 
association  was  formed.  By  the  "  voluntary  association  " 
plan,  shares  and  notes  may  be  issued  at  the  pleasure  of  the 
association,  they  being  secured  by  the  stock  of  the  constitu- 
ent companies  bought  and  deposited  with  the  board  of  trustees. 
This  amounts  to  a  virtual  consolidation  of  the  several  proper- 
ties, and  allows  of  a  greater  capital  stock  and  indebtedness 
than  permissible  to  the  companies  direct.  The  "  voluntary 
association  "  is  unknown  to  the  law,  but  the  subsidiary  com- 
panies are  not,  and  their  integrity  is  preserved.  Each  com- 
pany is  amenable  to  the  law  and  recognized  as  if  the  "  volun- 
tary association  "  did  not  exist. 

To  make  this  clearer,  suppose  a  railway  company  is  limited 
by  law  to  an  issue  of  $100,000  worth  of  stock.  John  Jones 
buys  all,  or  substantially  all,  of  this,  and  puts  it  up  as  collateral 
for  a  loan  of  some  greater  sum,  say  $200,000,  than  the  par  value 
of  the  stock.  There  is  no  legal  obstacle  in  the  way  of  his  doing 
this  provided  he  can  find  somebody  to  lend  him  the  $200,000. 

Voluntary  Bankruptcy.    See  "  Bankrupt." 

Voting  Trust.  It  is  often  desirable  to  place  the  voting  con- 
trol of  the  stock  of  a  corporation  in  the  hands  of  certain  persons 
for  a  definite  time.  A  "  voting  trust  "  is  formed,  the  stock- 
holders agreeing  to  delegate  the  voting  power  of  their  stock  to 
certain  named  persons,  called  "  voting  trustees." 

"  These  forms  of  control  as  vested  in  a  board  of  trustees 
represent,  not  ownership  of  stock,  but  merely  a  unified  voting 
power  during  a  specified  term  of  years." 

Any  dividends  declared  in  the  meantime  go  to  the  owners 
of  the  stock,  or,  more  particularly,  to  the  owners  of  the  "  Vot- 
ing Trust  Certificates."  (See  next  subject.) 

Voting  Trust  Certificates.  (See  "  Voting  Trust.")  When  a 
"  voting  trust  "  is  formed  it  may  be  so  arranged  that  each 
stockholder  deposits  his  stock  certificate  with  the  "  voting 
trustees,"  they  issuing  a  negotiable  receipt  for  the  same 
called  a  "  voting  trust  certificate." 

Voting  Trustees.    See  "  Voting  Trust." 

Voucher.  A  receipted  bill  or  any  written  evidence  of  money 
expended. 

W 

W.    The  "  ticker  "  abbreviation  for  "  West  "  or  "  Western." 
Wabash.    The  Wabash  Railroad  Co. 


42$  MONEY    AND    INVESTMENTS 

Waive  Protest.    See  "  Protest." 

Wall  Street.1  Financial  New  York;  meaning  not  only  all 
that  section  where  matters  of  finance  are  transacted  (not 
literally  Wall  Street  itself),  but  also  the  men  engaged  in  the 
management  of  such  matters.  As  one  financial  writer  well  puts 
it,  "  the  business  pulse  of  the  nation." 

Wall  Street  Crowd.  The  bankers,  brokers,  and  moneyed 
men  of  financial  New  York  (not  literally  of  Wall  Street  itself) 
who  mould  or  influence  matters  relating  to  finance  and  in- 
vestments. 

Walsh  Roads.  The  Southern  Indiana  Railway  Co.  (succes- 
sor to  the  Evansville  &  Richmond  R.  R.  Co.),  the  Illinois 
Southern  Railway  Co.  (part  of  this  system  was  formerly  the 
Centralia  &  Chester  R.  R.  Co.),  and  the  Chicago  Southern 
Railway  Co. 

Warehouse  Receipt.  A  written  evidence  issued  by  a  ware- 
house company  showing  that  certain  commodities  have  been 
stored  with  it.  Suppose  that  a  merchant  imports  a  quantity 
of  wool.  He  is  allowed  to  keep  the  same  in  what  is  called  a 
"  bonded  warehouse  "  for  a  certain  length  of  time,  without 
paying  duty;  or  the  distiller  of  whiskey  may  store  therein 
goods  subject  to  internal  revenue  taxes  for  a  limited  time, 
pending  the  payment  of  the  taxes  upon  same. 

All  transactions  upon  the  Chicago  Board  of  Trade  for 
future  delivery  are  based  on  the  delivery  of  "  warehouse  (some- 
times called  '  elevator ')  receipts,"  covering  the  property 
stored  in  a  regular  elevator  or  warehouse,  licensed  by  the 
State  and  under  control  of  the  State  Railroad  and  Warehouse 
Commission. 

All  "  elevator  receipts  "  for  grain  must  be  registered  by  the 
State  Grain  Registrar,  and  all  "  warehouse  receipts "  for 
provisions,  i.  e.  pork,  lard,  and  ribs,  must  be  registered  by 
the  Board  of  Trade  Provision  Registrar. 

All  regular  grain  elevators  and  provision  warehouses  are 
bonded  to  the  Chicago  Board  of  Trade  for  the  faithful  per- 
formance of  their  duties  as  prescribed  by  the  laws  of  the 
State  and  rules  of  the  Exchange. 

In  distinguishing  between  the  terms  "  warehouse "  and 
"  elevator  receipts,"  the  former  is  the  proper  term,  although 
the  latter  is  often  used  by  the  trade  to  designate  receipts 
covering  grain  on  storage.  Deliveries  on  provision  contracts, 
however,  are  always  designated  as  "  warehouse  receipts." 

1  The  name  Wall  Street  arose  from  the  fact  that  in  the  17th  century, 
when  New  York  was  settled  by  the  Hollanders  and  known  as  New  Amster- 
dam, there  was  a  stockade,  or  wall,  built  across  Manhattan  Island  near 
what  is  now  Wall  Street.  This  was  to  protect  the  inhabitants  from  Indian 
attacks. 


MONEY    AND    INVESTMENTS  429 

In  speaking  of  receipts  covering  grain  delivered  on  contracts, 
the  terms  "  warehouse  receipts  "  or  "  elevator  receipts  "  are 
understood  to  mean  the  same  thing  in  the  Chicago  market. 

Warrant.  State,  county,  city,  or  town.  An  order  given  by 
some  authorized  official  of  a  municipality  upon  its  treasurer, 
for  payment  to  some  person  for  services  rendered,  and  which 
this  person  presents  to  the  treasurer,  who,  for  lack  of  funds 
on  hand,  is  unable  to  meet  it.  The  process  is  to  take  the  order, 
or  "  warrant,"  as  it  is  very  familiarly  called,  and  stamp  on 
the  back  of  it:  "  Presented,  but  not  paid  from  lack  of  funds. 
This  warrant  bears  interest  from  this  date  until  paid  at  the 

rate  of %."  Below  this  is  affixed  the  treasurer's  signature. 

He  enters  the  description  of  this  "  warrant  "  in  a  book,  and 
the  stamping  upon  the  back  of  the  "  warrant  "  is  called  the 
"  date  of  registration."  This  "  warrant,"  if  made  payable 
"  to  bearer,"  is  negotiable,  the  same  as  any  piece  of  money; 
if  it  is  made  payable  "  to  order,"  it  becomes  negotiable  only 
by  indorsement,  the  same  as  a  check.  If  the  owner  of  the 
"  warrant,"  after  it  has  been  stamped  by  the  treasurer, 
prefers  not  to  hold  it  as  an  investment,  he  will  probably  sell 
it  to  some  local  bank  at  some  price  less  than  its  full  value, 
and  the  bank,  in  turn,  will  hold  it,  or  sell  it  to  some  investor, 
to  be  held  until  called  for  redemption.  It  is  customary  for  a 
municipality  which  has  "  warrants "  outstanding  to  call 
them  for  payment,  from  time  to  time,  as  money  accumulates 
for  that  purpose,  and  a  "  call  "  is  inserted  in  some  local  paper 
for  "  warrants "  of  certain  numbers  to  be  presented  for 
payment,  and  a  certain  date  is  named  upon  which  interest 
will  cease.  An  investor  in  "  warrants  "  must  provide  for  some 
way  to  be  notified  of  a  "  call  "  covering  his  '*  warrants," 
otherwise  he  may  lose  interest. 

Also  used  at  times  in  the  same  sense  as  "  interim  certifi- 
cates," to  which  refer. 

"  Dividend  warrants  "  are  orders  for  the  payment  of  divi- 
dends to  shareholders.  In  England,  however,  a  check  for 
the  payment  of  dividend  is  termed  a  "  dividend  warrant." 
An  "  interest  warrant  "  is  a  similar  order  for  the  payment 
of  interest  on  a  bond  or  like  security,  and  thus  a  check  for 
payment  of  the  interest  on  a  "  registered  bond  "  may  be 
termed  an  "  interest  warrant." 

In  general,  a  "  warrant,"  in  a  financial  sense,  is  an  instru- 
ment authorizing  a  person  to  receive  money  or  its  equivalent, 
or  some  security  or  negotiable  paper.  (See  "  Copper  War- 
rants.") 

Warranty  Deed.    See  "  Deed." 

Washington.  Among  the  Boston  quotations,  Washington 
Copper  Mining  Co.  is  understood. 


430  MONEY    AND    INVESTMENTS 

Wash  Sales.  One  broker  orders  another  to  sell  a  certain 
quantity  of  stock  at  a  fixed  price,  and  when  it  is  sold  on  the 
stock  exchange,  the  first  broker  buys  it  back  again.  The 
stock  does  not  actually  change  hands,  but  the  "  ticker " 
reports  the  sale  and  gives  a  false  impression  as  to  the  activity 
of  the  stock,  and  no  commission  is  received  by  the  broker 
making  the  purchase.  An  example  of  a  "  wash  "  transaction 
would  be  between  two  stock  exchange  houses;  the  first,  Smart 
&  Co.,  orders  Clement  Bros,  to  sell  a  thousand  shares  of  Union 
Pacific  stock  at  a  certain  price,  for  which,  of  course,  they  will 
receive  a  regular  commission.  Smart  &  Co.,  however,  buy 
this  stock  in  at  the  time  the  sale  is  made,  but  as  this  stock 
had  belonged  to  them,  they  receive  no  commission  on  the 
purchase.  This  sort  of  business  is  against  the  rules  of  the 
stock  exchanges,  and  when  discovered,  the  perpetrators  are 
penalized.  Had  John  Astor,  not  owning  a  seat  on  the  ex- 
change, given  Smart  &  Co.  an  order  to  sell  this  stock  through 
Clement  Bros.,  and  then  again  had  ordered  Smart  &  Co.  to 
make  the  purchase,  so  that  an  actual  commission  had  been 
paid  a  broker  for  both  the  buying  and  the  selling,  the  trans- 
action would  have  been  legal,  so  far  as  the  rules  of  the  stock 
exchange  are  concerned.  But  for  John  Astor  it  would  have 
been  a  "  wash  sale,"  as  he  was  endeavouring  to  establish 
an  apparent  activity  in  the  stock  which  really  did  not  exist. 
Such  a  transaction  would  come  under  the  head  of  "  manipula- 
tion," rather  than  a  "  wash  sale,"  because,  from  a  stock  ex- 
change point,  it  would  not  be  technically  the  latter. 

As  early  as  1820  a  rule  was  passed  prohibiting  such  trans- 
actions upon  the  New  York  Stock  Exchange. 

Dos  Passos'  Law  of  Stock-brokers  defines  "  wash  sales," 
on  the  basis  of  judicial  decisions,  as  "  not  real  sales,  but  made 
by  persons  interested  in  each  other,  for  the  purpose  of  giving 
a  fictitious  value  to  the  stock." 

Water.    See  "  Watered  Stock." 

Water  Bonds.  Of  all  the  different  purposes  for  which  a 
municipality  may  borrow  money,  it  is  conceded  that  bonds 
issued  for  supplying  the  inhabitants  with  water  are  the  most 
desirable  for  investment  purposes.  No  public  improvement 
is  more  necessary,  besides  which,  the  water  plant  is  not  only 
usually  self-sustaining,  but  frequently  earns  enough  to  pay 
the  interest  on  the  "  water  bonds,"  and  often  something  in 
addition. 

Water  Company  Bonds.  These  must  not  be  confused  with 
municipal  "  water  bonds,"  which  are  the  obligation  of  the 
town  or  city  issuing  them.  "  Water  company  bonds  "  are 
the  obligation  of  an  incorporated  company  and  secured  by  a 
mortgage  on  its  property.  Whether  these  are  desirable 


MONEY    AND    INVESTMENTS  431 

or  not  depends  upon  such  things  as  management,  location, 
permanency  of  supply,  amount  of  business,  etc.  The  fran- 
chise should  mature  at  a  later  date  than  the  bonds;  the  net 
earnings  should  be,  roughly,  twice  the  interest  charges;  there 
should  be  a  sinking  fund  large  enough  to  retire,  say,  at  the  rate 
of  one-half  of  the  issue  in  forty  years  —  this  is  a  very  mov- 
able quantity,  though.  And,  lastly,  a  satisfactory  contract 
with  the  municipality  during  the  life  of  the  bond  issue  itself, 
for  supplying  water  for  hydrant  and  other  purposes,  should 
exist.  This  contract  should  not  be  at  rates  so  high  as  to  be 
likely  to  encourage  dissatisfaction  and  a  desire  to  install 
other  and  competing  plants,  or  to  buy  out  the  one  already 
doing  the  business. 

Where  charters  have  included  conditions  which  stipulate 
that  the  water  supply  shall  be  pure,  trouble  has  sometimes 
resulted.  This  has  occurred  in  cases  where  the  municipali- 
ties have  desired  to  purchase  the  water  company  property,  a 
fight  being  waged  upon  the  agreement  for  the  supplying  of 
pure  water  not  being  complied  with. 

Greene  says,  in  his  "  Corporation  Finance:  "  "  Water  and 
gas  are  modern  necessaries  of  life,  and  the  supplying  of  these 
necessaries,  when  done  by  private  companies  under  a  conserv- 
ative plan,  is  a  proper  and  safe  business  for  the  investment 
of  money." 

Watered  Stock.  When  the  face  value  of  the  stock  issued  is 
greater  than  the  property  value  represented  by  it  at  the  time 
of  its  issue.  To  illustrate:  A  certain  amount  of  water  may 
be  put  into  a  quart  of  pure  milk,  and  a  greater  bulk  of  what 
appears  to  be  milk  will  result,  but  the  amount  of  food  matter 
has  not  been  increased  by  the  process.  No  more  will  it  in- 
crease the  property  value  of  a  corporation  to  increase  its 
stock,  unless  the  same  is  exchanged  for  real  value. 

The  exception  to  this  may  be  when  a  corporation  has 
accumulated  a  surplus  over  and  above  all  debts  and  the  face 
value  of  outstanding  stock;  then  an  additional  stock  issue 
is  sometimes  properly  made  not  greater  than  the  cash  value 
of  the  surplus.  Strictly  speaking,  this  latter  should  be  termed 
a  "  stock  dividend,"  and  is  in  no  sense  "  watered  stock." 

Water-Power  Company  Bonds.  See  "  Power  Company 
Bonds." 

Weak.  The  stock  market  is,  or  prices  are,  said  to  be 
"  weak  "  when  declining;  a  tendency  to  a  fall  rather  than 
to  a  rise  in  prices. 

Weather-Crop  Bulletin  (or  Report).  See  "  National 
Weather  Bulletin." 

Welcher.     A  debtor  who  takes  advantage  of  the  law  to 


432  MONEY    AND    INVESTMENTS 

evade  the  payment  of  a  debt,  which,  though  not  enforcible 
in  a  legal  way,  is  considered  an  honourable  obligation. 

Westinghouse.  Westinghouse  Electric  and  Manufacturing 
Co. 

Westralians.  Securities  of  West  Australia,  particularly 
mining,  which  are  dealt  in  upon  the  London  Stock  Exchange. 

Wheat.  The  trading  unit  is  1,000  or  5,000  bushel  lots,  or 
multiples  thereof.  The  commission  charged  for  the  purchase 
or  sale,  or  the  purchase  and  sale,  is  one-eighth  cent  per 
bushel.  The  usual  "  margin  "  required  is  5  cents  per  bushel. 
(See  "  Grain.") 

Wheat  Pit.    See  "  Pit." 

When  and  as  Issued.  Sales  of  securities  made  prior  to  their 
being  issued  —  especially  when  some  doubt  exists  as  to  when 
and  how  they  will  be  issued  —  are  traded  in  with  the  condi- 
tion attached  "  when  and  as  issued." 

When,  as,  and  if  Issued.  The  same  as  the  preceding,  with 
the  additional  condition  of  "  if  issued." 

The  first  trading  in  this  country  in  securities  at  the  time 
unissued  occurred  in  connection  with  a  sale  of  United  States 
4%  bonds  in  1895. 

When  Issued.  A  sale  made  of  a  new  security  conditional 
upon  an  uncertain  date  as  to  its  issuance.  (See  last  two  sub- 
jects.) 

Whipsawed.  Two  losses,  occasioned  by  making  a  purchase 
at  the  highest  price  and  selling  out  at  the  lowest;  or  the  re- 
verse. 

White  Knob.    White  Knob  Copper  Co.,  Limited. 

W.  I.    When  issued. 

Wide.  "  Wide  from  the  market:  "  a  price  one  or  two  per 
cent,  above,  or  below,  the  prevailing  price.  "  Wide  "  means 
far  apart,  or  away  from.  A  bid  of  75  and  a  simultaneous  offer 
of  the  same  security  at  79  would  be  a  "  wide  "  quotation. 

Widener-Elkins  Interests.  Corporations  in  which  the 
families  of  (in  Philadelphia,  Pa.)  Peter  A.  B.  Widener  and  the 
former  Wm.  L.  Elkins  have  a  partial  or  controlling  interest; 
such  as  the  United  Gas  Improvement  Co.,  Metropolitan  Street 
Railway  Co.  of  New  York,  Public  Service  Corporation  of  New 
Jersey,  Rhode  Island  Securities  Co.,  and  the  Philadelphia 
Rapid  Transit  Co.,  and  many  street  railway  companies  in 
various  sections  of  the  United  States,  including  the  States  of 
Illinois,  Ohio,  Pennsylvania,  New  Jersey,  Rhode  Island,  etc. 

Wildcat  Money.  Money  worth  less  than  its  face  value,  or 
worth  nothing  at  all.  Many  of  the  notes  formerly  issued  by 
our  State  banks  were  so  termed.  "  Wildcat  "  is  used  to 


MONEY  AND  INVESTMENTS  433 

denote  anything  deceptive  or  unreliable,  and  is  thus  often 
applied  otherwise  than  as  a  qualifying  adjective  to  "  money." 

Will.  The  law  usually  permits  every  one  of  legal  age  and 
of  sound  mind  to  provide  for  the  distribution  of  their  property 
after  death,  by  will,  and  in  most  of  our  States  this  applies  to 
married  women,  although  not  formerly.  Personal  property 
may  be  willed  away  by  those  not  of  age,  the  laws  of  some 
States  providing  that  male  children  as  young  as  eighteen  and 
female  children  as  young  as  sixteen  may  draw  wills  for  the 
disposition  of  personal  property. 

Witnesses  are  necessary  to  the  validity  of  almost  all  wills, 
the  number  varying  in  different  States. 

The  drawing  of  a  will  is  a  matter  of  great  importance,  and 
calls  for  exceeding  care,  and  should  always  be  entrusted  not 
only  to  a  lawyer,  but  to  an  exceedingly  good  lawyer. 

Window  Dressing.  Fixing  the  accounts  of  a  corporation 
so  that  they  will  look  well  in  a  public  statement.  In  New 
York,  the  trust  companies  are  compelled  to  make  exhibits  to 
the  State  authorities  at  stated  times.  A  calling  of  loans  and 
the  selling  of  securities  in  anticipation  of  such  a  report  so 
that  the  amount  of  cash  on  hand  would  show  favourably 
would  come  under  this  heading. 

Wind  Up.    Liquidate;   go  out  of  business. 

Winona.     Winona  Copper  Co. 

Wiped  Out.  Used  to  denote  a  total  loss  of  one's  possessions, 
or  the  loss  of  a  "  margin." 

Wire.  The  expression  "  to  wire "  has  more  particular 
reference  to  a  message  by  telegraph  rather  than  by  telephone. 

With  Exchange.    See  "  Payable  with  Exchange." 

With  Interest.    See  "  Accrued  Interest." 

Without  Interest.    See  "  Flat,"  meaning  the  same. 

Without  Offset.    See  "  Offset." 

Without  Recourse.  Without  responsibility  or  liability. 
Every  one  who  indorses  a  note  or  check  is  responsible  for  its 
payment,  if  its  original  signer  does  not  pay  it.  This  respon- 
sibility can  be  avoided  by  the  indorser  prefixing  the  words 
"  without  recourse  "  to  his  signature. 

It  does  not  follow,  however,  that  the  instrument  would 
always  be  accepted  in  this  form.  In  fact,  there  are  only 
certain  conditions  under  which  this  may  be  done.  To  illus- 
trate, a  note  broker  would  not  wish  to  assume  liability  in 
case  of  a  note  made  payable  to  him  by  indorsing  the  same, 
and,  in  such  an  instance,  he  could  resort  to  the  words  "  with- 
out recourse,"  which  would  be  usually  acceptable  to  the  pur- 
chaser of  the  note,  he  buying  upon  the  strength  alone  of  the 


434  MONEY    AND    INVESTMENTS 

maker  and  previous  indorsers,  if  any.  Had  the  note  been 
given  to  John  Smith  in  the  course  of  business,  and  John 
Smith,  having  received  a  direct  benefit  on  account  thereof, 
resold  the  note,  the  purchaser  would  then  wish  John  Smith 
to  incur  all  the  liability  of  an  indorser,  and  would  not  usually 
permit  him  to  avoid  recourse. 

Wolverine.    Wolverine  Copper  Mining  Co. 

Woman's  Signature.  Women  puzzle  bankers,  and  business 
men  in  general,  by  the  way  they  often  sign  their  names.  It 
may  not  occur  to  them  that  the  banker  does  not  necessarily 
know  that  the  wife  of  Henry  E.  Fisher  is  Jane  W.  Fisher. 
The  banker  may  have  been  doing  business  with  the  husband, 
who  may  be  taken  ill;  possibly  his  wife  will  write  some  com- 
munication regarding  his  business  and  will  refer  to  "  Mr. 
Fisher,"  and  sign  it  as  Jane  W.  Fisher.  Good  luck  attends  the 
banker  in  his  efforts  if  he  always  pairs  such  people  off  in  the 
way  they  belong.  The  best  way  for  a  woman  to  sign  her 
business  letters  is,  to  continue  above  illustration,  Jane  W. 
Fisher,  and  then  directly  below — (Mrs.  Henry  E.  Fisher); 
or  the  words  "  wife  of  "  may  be  inserted  between  the  two 
signatures.  Of  course,  in  all  legal  documents  and  in  checks, 
etc.,  she  must  use  her  legal  signature,  which,  in  this  instance, 
would  be  Jane  W.  Fisher.  The  writer  has  seen  four  different 
consecutive  letters  received  from  the  same  woman,  all  within 
a  period  of  less  than  two  weeks,  the  first  one  signed,  we  will 
say,  Jane  W.  Fisher,  the  second  one  J.  W.  Fisher  (thus  being 
mistaken  for  a  man),  the  third,  Mrs.  Jane  W.  Fisher,  and  the 
fourth,  Mrs.  Henry  E.  Fisher.  This  was  confusing,  indeed. 
A  system  of  letter  filing  in  an  office  may  be  much  upset  by 
this  method,  and  letters  incorrectly  filed  by  some  clerk  and 
never  afterwards  located.  Countless  women  sign  their  busi- 
ness communications  in  a  way  that  makes  it  impossible  to  tell 
whether  or  not  they  are  married.  In  all  business  communica- 
tions the  "  Miss  "  or  "  Mrs."  should  be  made  apparent. 

The  query  is  often  raised  as  to  how  a  married  woman 
shall  legally  sign: 

There  is  no  law  fixing  other  than  the  surname  of  a  woman 
who  is  married.  When  Mary  Jane  Doe  becomes  Mrs.  Brown 
the  law  provides  no  rule  which  she  must  follow.  It  would 
seem  more  logical  to  use  the  form  "  Mary  Jane  Brown,"  but 
as  a  matter  of  convenience  to  indicate  whom  the  person  is  — 
or  was  before  marriage  —  "  Mary  Doe  Brown  "  is  better. 
Either  method  of  signing  is  accepted.  It  is  customary, 
however,  when  a  woman,  after  marrying,  executes  papers 
transferring  title  to  something  which  she  acquired  under 
her  maiden  name,  to  put  a  recital  in  the  instrument  she  signs 
setting  out  the  fact.  For  instance,  in  discharging  a  mort- 


MONEY    AND    INVESTMENTS  435 

gage,  the  discharge  would  contain  a  clause  substantially  like 
this:  "  I,  Mary  Jane  Brown,  the  holder  of  a  certain  mortgage 
given  by  Richard  Rowe  to  me  under  my  maiden  name  of 
Mary  Jane  Doe,  dated  January  1,  1907,  and  recorded,  etc." 

This,  or  something  equivalent  to  it,  is  inserted  in  the  papers 
for  the  purpose  of  identification. 

Woolen.     American  Woolen  Co. 

Wore  Off.    Prices  gradually  declined. 

Worked  for  Export.  Indicates  that  a  quantity  of  grain 
has  been  sold  for  export  purposes.  It  is  not  necessarily  under- 
stood, however,  that  the  grain  is  being  actually  delivered  by 
the  elevators  or  warehouses. 

Worked  Off.  Prices  gradually  declined.  "  The  market 
worked  off  fractionally;  "  prices  declined  an  eighth  or  a 
quarter  per  cent.,  for  example.  The  fall  in  prices  was  by 
fractions  and  not  whole  points. 

Working.    See  "  Manipulation." 

Working  Capital.  The  money  which  is  actually  needed  and 
used  in  the  conduct  of  a  business. 

Working  Expenses.  This  is  another  term  for  "  Operating 
Expenses." 

World's  Shipments.  A  Chicago  Board  of  Trade  term  indi- 
cating weekly  shipments  of  grain  from  exporting  to  importing 
countries. 

World's  Stock  of  Money.  The  Director  of  the  Mint,  at  the 
close  of  1905,  estimated  the  monetary  stock  in  the  principal 
countries  of  the  world,  as  follows: 

All  kinds  —  $12,215,400,000;  classified  as  follows:  Gold  — 
$6,483,500,000;  silver  — $3,176,400,000;  uncovered  paper 
currency  —  $3,555,900,000. 

Ignoring  certain  South  American  countries,  which  it  is 
hardly  fair  to  include,  the  greatest  per  capita  stock  is  held 
in  France,  followed  next  by  the'United  States,  then  Australasia, 
The  Netherlands,  Belgium,  Germany,  Canada,  and  Greece, 
in  the  order  named. 

Write  Off.    This  has  the  same  meaning  as  "  charge  off." 

Wyandot.    Wyandot  Copper  Co. 


X.     The  "  ticker  "  abbreviation  for  "  ex-coupon,"  "  ex- 
dividend,"  or  "  ex-interest." 


XC.   The  same  as  "  ex-coupon." 

' 


436  MONEY    AND    INVESTMENTS 


Yankee  Rails.  The  general  foreign  —  particularly  London 
—  name  for  United  States  railway  shares.  As  a  rule,  however, 
railway  shares  traded  in  upon  the  New  York  Stock  Exchange 
are  those  referred  to. 

Yankees.  The  general  foreign  —  especially  London  —  name 
for  United  States  securities;  meaning  particularly  those  dealt 
in  upon  the  New  York  Stock  Exchange. 

Year  Money.    Same  as  "  Year  Note." 

Year  Note.  A  note  or  written  agreement  to  pay  money  at 
the  expiration  of  one  year  from  its  date. 

Yen.  The  monetary  unit  of  Japan,  equalling  $.498  United 
States  money. 

Yield.    See  "  Net  Return  upon  the  Investment." 

Z 

Zinc.    American  Zinc,  Lead  &  Smelting  Co. 
MISCELLANEOUS 

I.  The  "  ticker  "  abbreviation  for  "  first."    It  is  used  in 
connection  with  such  securities  as  "  first  mortgage  bond," 
"  first  preferred  stock,"  etc. 

II.  The  "  ticker  "  abbreviation  for  "  second."     It  is  used 
in    connection   with  such  securities    as   "  second    mortgage 
bond,"  "  second  preferred  stock,"  etc. 

III.  The  "  ticker  "  abbreviation  for"  third."     It  is  used  in 
connection  with  such  securities  as  "  third  mortgage  bond," 
etc. 

P.  The  sign  for  "  Peso,"  the  monetary  unit  of  the  Philippine 
Islands,  as  $  is  for  our  dollar. 

i st.  First  mortgage. 

2d.  Second  mortgage. 

3d.  Third  mortgage. 

$.  The  sign  for  the  United  States  "  Dollar."  Since  the 
new  coinage  law  went  into  operation  in  Mexico,  in  1905, 
our  $  sign  has  been  adopted  as  a  sign  for  the  standard  Mexican 
"  peso." 

£.  Sign  for  the  English  "  pound  sterling  "  as  $  is  for  our 
"  dollar." 

£  E.  "Pounds  Egyptian;"  the  sign  of  the  Egyptian 
"  pound,"  which  slightly  exceeds  in  value  the  English  "  pound 
sterling,"  being  equal  to  $4.943  United  States  money. 


